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Why the City Chic share price is rising on a big US acqusition

The City Chic Collective Ltd (ASX: CCX) share price is up 12% to $2.79 this lunchtime after the apparel retailer announced it has a won an auction to buy the e-commerce assets of US retailer Avenue Stores LLC. It bid US$16.5 million to win the auction and will finance the deal with a mix of cash and debt. 

Avenue is a US retailer targeting budget conscious ‘plus-sized’ woman in the 25 to 55-year-old group with the auction coming about due to it filing for Chapter 11 bankruptcy. The deal will close mid-October pending approval from the US bankruptcy court and regulators. 

For the financial year ending June 30 2019 City Chic reported adjusted EBITDA (operating income) of $24.9 million on sales of $148.4 million. The sales and EBTIDA climbing 12.6% and 25% respectively thanks to rising margins. 

City Chic is one of the few retailers to avoid the gloom on the local market with the stock up 95% over the past year from $1.41 to $2.75 today. Others to have enjoyed a good year include Accent Group Ltd (ASX: AX1) and Premier Investments Limited (ASX: PMV).

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Motley Fool contributor Tom Richardson owns shares of Accent Group.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has recommended Accent Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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