City Chic first-half loss is on the way

TROUBLED women’s fashion chain City Chic has gone through a painful six months and expects to post a first-half loss of $2.5m to $4m.

The plus-size women’s fashion and apparel retailer warned on Friday that it expected group sales for the December half to be down 8 per cent to $168.6m as volatile trading activity through key sales events like Christmas and Boxing Day sales required more discounting and promotions that eroded its gross margins. There was also a spike in its costs of doing business as a percentage of sales for the half.

“The combined effect of reduced revenue and gross margin, and higher fulfilment costs, is expected to result in an underlying EBITDA (earnings before interest, depreciation and amortisation) loss for the first half of fiscal 2023 of between $2.5m-$4m,” it said, subject to finalisation of its accounts.

The retailer said sales in Australia and New Zealand were expected to be down 3 per cent to $79.46m, sales in the Americas down 14 per cent to $68.93m and in Europe sales would be down 4 per cent to $20.16m. Online sales fell 21 per cent in the half to $115.4m.

City Chic has had an awful 12 months that has seen a string of profit downgrades. Shares in the company are down more than 85 per cent over the last year. However, this week it won over a new and powerful friend when retail entrepreneur and billionaire Brett Blundy revealed he had bought up a 7.3 per cent stake in City Chic, sending the shares 16 per cent higher on Wednesday as investors hoped Mr Blundy’s extensive retail experience would be of some help to the City Chic business.

A key problem plaguing City Chic over the last year has been a huge build up in inventories, which shocked and concerned analysts when it was announced, with many fearing City Chic would be stuck with excess fashion and apparel stock and eventually be forced to sell it at cut down prices.

In its update, City Chic confirmed its inventory was expected to be $163m-$164m at the end of the December half, below the guidance given at its annual meeting.