Tougher competition shakes up City Chic
FASHION retailer City Chic has taken investors on a whiteknuckle ride, losing half its market value in two days as analysts downgrade the stock.
Citi Chic shares tumbled almost 26 per cent, or 25.5c on Monday to close at 74c, touching lows not seen since mid 2018. This followed a 28.4 per cent slump on Friday when it released a trading update.
The two-day rout wiped more than $150m from its value as investors reacted to a toxic mix of bloated inventories, a pullback in consumer spending and forced discounting to clear excess stock.
On Friday the plus-sized women’s fashion chain said it
had been forced to slash prices to encourage consumers to shop at its stores amid heightened retail competition.
City Chic, which has stores across Australia, Europe and North America, said competit
ion was particularly intense in the US – where promotional activity typically reserved for Black Friday sales were happening earlier than usual, depressing margins.
UBS has dramatically lowered its 12-month price target for City Chic to $1.10 from $2 and slashed its expected earning for 2023 and 2024 by 72 per cent and 49 per cent respectively.
“A key reason is many City Chic customers are low to middle income earners and hence are more exposed to a higher cost of living, which has increased rapidly. In response, City Chic has needed to be more promotional online to generate sales globally, which is occurring as competitor discounting has been elevated especially in the USA,” UBS analyst Shaun Cousins said.
Macquarie Research has downgraded its recommendation on City Chic to “neutral” from “outperform”.