Plus-size retailer City Chic has reported a turnaround in its earnings for FY25, driven by a sales boom in its Australia and New Zealand markets and cost-cutting across the business.
The brand’s global sales revenue lifted by 2.3 per cent in FY25 compared to FY24, hitting $134.7 million, with comparable store sales growth up 8.4 per cent. Second-half sales surged higher, up 10.3 per cent compared to the prior corresponding period (PCP).
Subject to audit, City Chic is also reporting a swing to green in its earnings before interest, tax, depreciation and amortisation (EBITDA). The ASX-listed business now expects EBITDA to hit between $6 million and $6.5 million in FY25, a stark contrast to a loss of $8.4 million in FY24.
The plus-size retailer’s trading margin is also up 3.6 percentage points to 58.9 per cent, with inventory down 12 per cent to $27.2 million.
City Chic CEO and managing director Phil Ryan said returning to profitability is a significant milestone for the business.
“We’re making strong inroads in our margin improvements and cost base reductions and are now focused on driving revenue growth, which will deliver sustainable profitability.
“We have seen positive momentum in ANZ with revenue up 15.2 per cent on PCP in the second half, customer numbers remain strong, and traffic both online and in stores has been positive.
“The growth has been lower than planned, with the expected uplift from the recent interest rate cuts and improving consumer sentiment yet to materialise to the extent anticipated.”
Despite the growth in ANZ, Ryan noted that its US market remained volatile, with full-year sales in the country down 14.9 per cent, which eased up to negative 5.9 per cent in the second half. The company’s US market makes up just over 20 per cent of total sales against ANZ, with the group’s ANZ market hitting $105.8 million in FY25.
Ryan said the ongoing changes in US foreign trade policy are directly impacting demand in the country, which is believed to have dampened revenue and EBITDA to hit slightly below its guidance.
Both stores and online reported growth in FY25, with online up 11.5 per cent and stores up 3.8 per cent. In the second half of FY25, online surged by 21.8 per cent, with sores also up in the double-digits a 11.2 per cent.
The stronger performance in online sales, with its largely variable cost base, did not have the same positive EBITDA impact, according to City Chic, to offset the lower-than-expected performance in store sales, which are subject to a largely fixed cost base.
Meanwhile, the retailer’s cost-out programs have been fully executed, with further annualised savings to flow through in FY26. The cost of doing business has reduced from $96.5 million in FY24 to $84.4 million in FY25, “reflecting greater labour and fulfilment efficiencies and reductions in other operating expenses,” City Chic reported.
According to Ryan, making the inroads on improved top-line performance hasn’t been easy, adding that he and the team are only halfway there. The improvements come after a few years of struggling for City Chic, which included selling off two international brand subsidiaries, Evans in the UK and Avenue in the US.
With its simplified structure and significantly lower cost base, Ryan said City Chic is well-positioned to take advantage of more favourable market conditions when they return.
“This recovery has been led by better product – better quality, better ranges, and a stronger customer proposition,” he said. “We have listened closely to what she’s been telling us, implemented the changes, and have been pleased by her response to our new collections. We acknowledge there's more to achieve, but our momentum is strong and headed in the right direction.
“Our customer numbers have held firm, she’s stayed with us, and we’re committed to deepening that relationship. The pathway to future growth is in listening to her, delivering exactly what she wants, and building the kind of loyalty that drives increased annual customer spend.
“The early results from our new Wetherill Park store have been encouraging, with positive customer feedback on the new concept – a great sign for our future store strategy. In the USA, our business remains profitable, and we’ve worked closely with our suppliers to share the impact of the tariffs and accordingly have cautiously recommenced limited purchasing in the USA to replenish best sellers and deliver newness.
“We’ve turned the corner, and with a stronger business behind us, we’re looking ahead with clarity, confidence, and a focus on delivering the best assortment for our customers.”