City Chic Collective is expecting sales revenue to be down approximately 8% to $168.6 million for the first half of FY23.
While the result is up 38% on FY21, the plus-size fashion retailer confirmed promotional activity has continued to impact its gross margin.
City Chic reported that promotional activity was required to stimulate demand through the key Black Friday/Cyber Monday and Christmas/Boxing Day sales period.
The combined effect of reduced revenue and gross margin, and higher fulfilment costs, is expected to result in an underlying EBITDA loss (pre-AASB16) for the first half of FY23 of between $2.5-$4 million, subject to finalisation of ordinary accounting period-end review and audit.
City Chic confirmed its inventory is expected to be between $163-164m at the end of 1H FY23, which is below the range guided at its AGM. The Group said it remains on track to deliver an inventory balance of $125m to $135m at the end of FY23 with purchases in second half FY23 remaining flexible to demand fluctuations.
In line with current business requirements and to reduce line fee costs, City Chic said it has amended its multi-currency debt facility to $46.5m and increased the amount available for working capital. The amendments also include the current Net Leverage Ratio and Fixed Cover Ratio covenants being replaced by a Liquidity Ratio for the second half of FY23.
The facility limit is expected to be reduced by a further $10m at the start of FY24 in line with the Group’s expectations of being in a positive net cash position by the end of FY23. Net debt is expected to be $12.9m as at the end of 1H FY23.
City Chic MD and CEO Phil Ryan said it will maintain strong engagement with its core customer groups.
“We remain extremely confident in executing on our strategies and returning to profitable growth as these cyclical headwinds unwind,” Ryan said. “We thank our stakeholders for their support and look forward to progressing our vision to lead a world of curves.”