City Chic Collective has recorded a 15.2% drop in year-to-date (YTD) group sales amid a backtrack on its promotional strategies.
Compared to FY22 YTD sales, its ANZ market reported a 10.8% drop to $122.1 million in YTD sales for FY23. This is behind an 8% drop in Europe, Middle East and Asia (EMEA) to $33.9 million and ahead of a 28.6% drop in the Americas of $106.2 million.
Its online channels recorded a 23.2% drop in YTD sales to $182.5 million compared to FY22, but are up 12.7% on FY21.
Moreover, City Chic’s store portfolio accrued $53.5 million in sales, up 6.2% from last year and down 8.2% from FY21.
According to City Chic, its promotional activity was reduced in the United Kingdom and ANZ as it entered the fourth quarter; however, this reportedly impacted conversion rates with consumers not responding as expected.
With a return to promotional activity in April, sales in ANZ improved, while the UK saw “exceptionally challenging” operations with heavy discounting required to drive demand.
City Chic reported that these unique circumstances significantly impacted March revenue.
Fulfilment costs YTD as a percentage of revenue remain around 5% above last year due to lower average selling prices and volumes. However, April saw improvement in cost per transaction as the Group’s warehouse consolidation nears completion.
“Operating conditions have remained challenging, resulting in the continuation of strong promotional activity across the market,” City Chic CEO and managing director Phil Ryan said. “We responded to drive demand and clear excess inventory lines, focusing on converting inventory into cash while reducing costs.
“After the disruption to our supply chain in March, it is pleasing to see revenue improving through April and May, especially in the US.”
Meanwhile, the plus-size retailer amended its $46.5 million debt facility via the support of its lender, which is expected to result in a staged reduction in the facility limit to $21.5 million by the end of FY24, alongside the extension of the current covenant requirements through Q1 FY25.
The company believes that this measure will return the business to profitable growth through FY24.
City Chic is currently undergoing a strategic review in a bid to generate profitable growth, focusing on its online and global businesses with assistance from external advisors GNG Partners.
Accordingly, the global retailer has decided to accelerate its inventory unwind, with a focus on EMEA given the additional stock in that market. This is expected to drive cash flows and reduce the inventory balance at the end of FY23 to less than $100m.
Inventory is expected to reduce further through FY24 as City Chic continues to drive promotional activity, with margins likely to remain soft through H1 FY24.
The Group expects a more robust inventory position from Q2 FY24, with ‘newness’ ready for the key trading period, and to be clean into the second half of FY24.
As part of its strategic review, City Chic closed seven warehouses with two further closures due in the next three months, and completed its transition to an automated 3PL facility in the USA. This is expected to save the company around $10 million.
The plus-size retailer shifted to a new international freight forwarder to lower annual stock input costs by around $1 million.
City Chic is also focusing its range on high-value products and revising its product sourcing strategy in a bid to return to a more agile supply chain.
The next stage of the review focuses on the Group’s operations across channels and geographies.
“The strategic review will build on the actions we’re taking to strengthen our balance sheet, streamline our operations globally to return to a more agile operating model, improve margin and logistics as a percentage of revenue and reduce our cost base to return to profitable growth,” Ryan said.
“I look forward to reporting on the outcomes of the review as we look to return to a position of strength for our shareholders and other stakeholders.”