Australian-born plus-size retailer City Chic has continued to “aggressively” clear winter inventory in Australia and New Zealand and summer inventory in the USA for the first eight weeks of FY24 in a bid to rightsize business operations.
The omni-channel retailer noted its stock clearing initiative was done to ensure City Chic has new seasonal product for the upcoming holiday period.
This has impacted revenue and margins with sales down by 33% on the prior corresponding period (PCP). In AU/NZ, sales were down 34% year-on-year (YoY) as the majority of Europe, Middle East and Asia (EMEA) stock was relocated to Australia.
In the USA, sales were down 31% with online performing better than partners.
City Chic added it is seeing strong sell-through of its new seasonal product in both markets as it transitions to “better end ranges”, with demand expected to continue improving into the Christmas season.
“The team has worked extremely hard to get our inventory back in shape and restore our balance sheet,” City Chic CEO and MD Phil Ryan said. “As part of our review process, we had the opportunity to sell the Evans business and exit EMEA which now gives us a clear run at the highly lucrative USA market while we consolidate our leading position in Australia.
Ryan said it has exited FY23 with a materially improved inventory position, alongside renewed focuses in a bid to return the company to profitability. This includes creating emotional connection with its female customers, shifting product assortments and focusing on higher value product, and simplifying the business and driving down costs.
In FY23, City Chic right-sized its inventory position with a balance of $53.8 million on July 2, 2023, delivering a closing net cash balance of $10.9 million.
City Chic cited the heavy promotional discounting alongside stock write-downs of aged and fragmented lines. As a result, its gross margin per cent of revenue was down 18.7% points with nearly half of that related to inventory provisions and write-downs.
City Chic also reduced its debt facility limit to $20 million and adjusted its covenants in line with the changing business requirements. This will reportedly reduce a further $5 million post the end of FY24, further lowering its funding costs.
“The cost reduction program will continue through H1 [first half] FY24 and City Chic expects to have new seasonal inventory in market ready for Q2 with a strong inventory position into H2 FY24.
“City Chic is targeting 60% gross margin and fulfilment cost of below 19% of revenue. It is also targeting three inventory stock turns and maintaining positive net cash at year-end.
“While City Chic is forecast to be loss-making in 1H FY24, it expects to be trading profitably in H2 FY24 as the benefits of these strategic actions are realised.”
For FY23, City Chic reported a group revenue decline of 15.8% to $268.4 million with demand remaining volatile across each of its markets, requiring heavy promotional activity to drive sales.
Compared to FY21, revenue was up by 7%.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was a loss of $24 million, driven by lower consumer demand in all regions and the group’s focus on clearing inventory.