Australian plus-size retailer City Chic has pulled forward the bulk of its US inventory for this year and has since paused future supply into the country amid the US and China tariff war.
In an update to investors, City Chic confirmed that the bulk of its Summer 2025 range is in the USA, alongside a substantial portion of its Winter 2026 product, which is expected to sustain operations in the country through to Q2 FY26.
The company has also lowered its marketing spend in the country, and added that if things don’t improve over time, City Chic may exit the US market altogether.
This comes as US tariffs on China remain at 145 per cent, with the de minimis rule that exempts imports valued under $800 being scrapped on Chinese goods from May 2.
Approximately 20 per cent of the company’s revenue is generated in the USA, and over 90 per cent of its products are sourced from China.
“While these tariff rates have been revised multiple times over the past three months and remain subject to change, as things stand they add 145 per cent to the historic average duty rate of 27.5 per cent on our USA product,” City Chic reported.
Despite the proactive approach, the plus-size retailer has reduced its US sales projections for FY26.
“Pleasingly, with its predominantly variable cost structure, and a further $1.5 million in fixed cost reductions, it is anticipated that this approach will help enable the business to maintain a neutral contribution margin in the short term, while also unlocking a material portion of cash tied up in working capital through the sell-down of pre-tariff inventory,” City Chic added.
The company’s management team is also monitoring all peer retailers in the US that source product from China, “many of which are anticipating or already implementing price increases.”
City Chic does not believe it will be feasible to raise its own prices sufficiently to entirely offset tariffs in the USA without materially impacting demand, particularly given the current economic climate.
“Given the economic uncertainty and fluidity of potential tariff negotiations, it is not yet possible to provide a reliable estimate of the impact on the revenue of the USA business for the remainder of FY25,” City Chic reported. “Should these conditions continue over the medium to long term, the group has commenced discussions with its suppliers to further mitigate the impact of the increased tariffs.
“Due to restructuring of the business and the variable nature of the cost base, the Group has the option to exit the USA with minimal cost if the tariff situation remains uncommercial.”
These US challenges come as City Chic reported a 17 per cent lift in revenue across its Australia and New Zealand market for the first 18 weeks of the second half of FY25. According to City Chic, this growth is lower than planned, with the expected uplift from the recent interest rate cut in April and improved customer sentiment yet to materialise to what it had anticipated.
Comp sales in the ANZ market were up 21 per cent, with group online traffic up 23 per cent.
Total revenue growth was up 8 per cent, offset by a 13 per cent fall in sales for its US market.
City Chic’s ANZ business is on track to have 78 stores open by the end of FY25, including a new store format in Wetherill Park in New South Wales.
The company has not revised its total global revenue and EBITDA guidance for FY25 – with revenue expected to hit between $137 millio and $147 million and EBITDA of between $8 million and $12 million – but projects it is target the lower end of these ranges amid current challenges.
“While management will use the low end of this range as its target for the remainder of the financial year, the current volatility and uncertainty puts this result at risk and results could fall short of this target,” City Chic reported.
“The management team remains firmly focused on executing its strategy, driving sales, protecting margins, and delivering the planned cost reduction program to position the business for long-term success.”