City Chic share price dives another 12% in dire week

The City Chic Collective Ltd (ASX: CCX) share price is currently down 10.3% at $1.79 today after trawling another 12% low for most of today. This means shares in the ASX-listed plus-sized apparel global retailer are now down by almost 30% since 24 August.

The ASX retail share has fallen hard after the release of the company’s FY22 results.

What did City Chic tell investors?

The company reported that sales rose by 39% to $369.2 million, with comparable sales growth of 25.5%. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) went up 11.3% to $47.1 million. Underlying net profit after tax (NPAT) increased by 14.5% to $28.5 million.

City Chic also said that its global customer base increased 30% over the year to 1.4 million active customers, with growth in all regions.

Online comparable sales growth was 33.8%, with 82% online penetration. It said that 56% of its revenue came from the northern hemisphere. The ‘partner business’ grew to $30 million for FY22, with $22 million of that coming in the second half.

However, there was one factor that saw a big swing to a negative position. Operating cash flow sank from a positive $15.2 million in FY21 to negative $51.9 million in FY22. Management said there was a working capital increase of $90.3 million with an investment in inventory of $128.9 million.

City Chic said its inventory is expected to normalise in FY23. Inventory jumped from $67 million at 27 June 2021, to $125.7 million at 26 December 2021 and then up to $195.9 million at 3 July 2022. The company said that 48% of inventory is available for sale, while 52% is secured for release over future periods.

Management said that the inventory supported growth with reduced product cost and supply chain risk.

Outlook for FY23

City Chic said it expected another year of profitable growth, despite the ongoing global economic uncertainty. This was due to City Chic’s increasing market share across geographies and channels and the investments in its distribution infrastructure.

The company said that to hedge against anticipated promotional activity within the ‘plus market’, it would implement price increases where appropriate to mitigate the risk of ‘margin compression’.

In the first seven weeks of FY23, City Chic advised that trading was “broadly” in line with the prior corresponding period, with a return to positive momentum in August,

Australian stores were “trading above expectations and ahead of last year given the impact of store closures”. Australian online sales were below last year in the first two weeks of July but have performed well since, trading above last year.

The US market was “volatile”, with the City Chic website trading above last year, as better dressing demand remains “strong” and the Avenue website trading “below” last year, but showing week on week improvements. The UK “continued to show growth”.

Its partner business has “continued to perform well” and is expected to drive incremental revenue growth throughout FY23.

City Chic share price snapshot

Over the last month, the City Chic share price is down more than 25%. And City Chic shares have tanked 70% since the beginning of 2022.

The post City Chic share price dives another 12% in dire week appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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