Shares in City Chic Collective Ltd (ASX: CCX) are tracking higher on Wednesday following the release of its trading update for H2 FY22 to date.
This represents the 17 trading weeks from 27 December 2021 to 24 April 2022, per the company. City Chic is releasing the update ahead of the Goldman Sachs Emerging Leaders Conference (hosted today), and the Macquarie Australia Conference on 3 May 2022, where it will be presented at both events.
At the time of writing, the City Chic share price is trading 115 basis points higher at $2.63 apiece just after midday on Wednesday.
City Chic share price jumps on earnings momentum
Key highlights for the company this period, per its release were:
- Sales of $178 million, a 46% year on year (YoY) growth
- Robust earnings with $23.5 million underlying EBITDA and $14 million net profit after tax (NPAT)
- Second half to date (H2 FY22 to date) – strong total sales growth at 25% YoY
- USA total sales growth of 47%
- Evans performing at pre-acquisition levels
- Australian sales performing above last year, with online channels up 13%
- Global partner sales growth of 465%
What else happened this quarter for City Chic?
The company says it posted a solid 46% YoY growth in sales and printed $178 million during the period. Of this result, there was a 71% jump in global traffic growth and 64% growth in active customers from half-to-half.
After expenses and tax, City Chic saw earnings of $14 million resulting in a net profit margin of approximately 8%, whilst a little higher up the income statement it printed underlying EBITDA of $23.5 million, 1% up YoY.
The company also saw substantial growth in its Americas markets, observing flow of 34.3 million annually plus adding another 582,000 customers in the year. Similar trends were observed in Australia too.
City Chic mentioned that USA growth has widened to 47% in FY22 to date, whilst European, Middle East and Africa (EMEA) sales have jumped 69%.
It also says that global partnerships are currently growing, with sales growth up 465% in H2 FY to date – 27 December to 24 April.
Meanwhile, Australia & New Zealand sales have curled up by 3% in the same time, “against a strong [H2 FY21] and in a challenging market due to the continued impact of the COVID-19 Omicron variant in the first few months of the second half.”
What’s next for City Chic?
The company appears optimistic based on projections in its presentation today. It expects H2 FY22 EBITDA “to exceed 1H FY22 EBITDA, subject to ongoing consumer demand in the key trading months of May and June”.
City Chic mentioned it has also produced a formidable counter-attack to the global supply chain disruptions through its proactive management of inventory.
“We have the inventory ready, and in market, to drive growth in all regions, protecting demand in the balance of 2H and into Q1 FY23,” it remarked.
“Consistent with comments made at the 1H result, our inventory position will continue to build in [the second half].”
Net debt position, as at financial year end, is expected to be in the range of $6-12m, subject to demand and supply chain volatility. Post the Northern Hemisphere peak sales period, and as the supply chain challenges ease, we expect to release inventory and deliver strong positive cash flows in FY23.
City Chich share price snapshot
In the last 12 months, the City Chic share price has collapsed more than 42% and is now down 52% for the year to date. Across all major time frames, City Chic shares are down.
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