City Chic Collective expects to deliver positive EBIT in the first half of FY27, after pulling back on discounting drove a sharp lift in full-price store sales and margins.
The half-year earnings prediction is subject to sales momentum continuing through the Black Friday and Christmas trading period.
City Chic reported comparable sales growth of 19.6 per cent across its full-price stores for the 18 weeks to November 1, while ANZ comparable store sales rose 15.4 per cent.
The gains follow a planned decision in August to materially reduce promotional activity, particularly online. Group revenue, excluding wholesale, fell 1.7 per cent on the prior corresponding period, while gross margin dollars rose 2.2 per cent. Group comparable sales grew 1.2 per cent, comparable trading gross margin dollars climbed 5.1 per cent and group trading gross margin widened by 240 basis points.
“In August, we made the planned step change in our promotional cadence to enter the Spring season with reduced discounting," City Chic CEO and managing director Phil Ryan said. "We had confidence in the range and had reshaped the price point mix to deliver value in today’s retail environment, rather than relying on deeper and more frequent promotions."
The reset weighed on online sales. ANZ online comparable sales fell 7.4 per cent and trading gross margin dollars dropped 4.5 per cent, although online trading gross margin improved by 200 basis points. City Chic noted that online revenue momentum is improving as the Spring/Summer range builds, supported by a more profitable sales mix and lower fulfilment costs.
“As expected, the reduction in promotional activity initially affected sales, particularly online where we comped higher promotional activity last year. However, we maintained our discipline, and sales momentum has since improved in response to the new season range, with materially healthier margins,” Ryan said.
In the USA, comparable sales fell 12 per cent as the business cut back on discounting, but comparable trading gross margin dollars rose 7.1 per cent. Online trading gross margin in the USA was 1060 basis points above the prior corresponding period, and the business remains profitable.
ANZ stores delivered comparable sales growth in each of the first 18 weeks of the financial year. Total store sales rose 7.5 per cent, despite the network being seven stores smaller than a year earlier. Four stores have closed since June, while a new store opened at Rouse Hill Town Centre in October. Clearance stores also improved profitability as the retailer’s DFO strategy gained traction.
City Chic expects to end the half with a positive cash balance and no drawn debt. Its $10 million debt facility remains in place until March 31, 2028, with the second of two required FY27 clean downs expected in December.
The retailer operates 72 stores across Australia and New Zealand, and sells online in ANZ and the USA, as well as through third-party marketplace partners. It will report its 1H FY27 results in February 2027.