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ASX fashion retailers bounce back

The ASX fashion retailers have bounced back from store closures with share prices and online sales surging. Here we take a look at how 2 ASX fashion retailers are recovering from the coronavirus pandemic.

City Chic Collective Ltd (ASX: CCX)

The City Chic share price is up 281% from its March low to $3.05, 14% below its $3.58 year high. The share price recovery saw City Chic joining the S&P/ASX 300 (ASX: XKO) last week. The plus-size clothing retailer closed Australian and New Zealand stores during the height of the coronavirus pandemic but has since reopened. During closures, City Chic benefitted from its high proportion of online sales, which account for two-thirds of global sales. Despite online already accounting for a large part of the business, Australian and New Zealand saw online sales growth of 57% during the store closure period.

City Chic quickly adjusted its product mix to better suit customer needs, recording strong buying of intimates, casual, and streetwear which has offset weakened demand for higher-end dressing. Increased promotions have been used to manage cashflows and inventory during the period of uncertainty, which means online gross margins have been lower. Positively, the company has finalised negotiations with landlords, agreeing to reduced rents during store closures and market appropriate rents going forward. Through agreements unable to be reached on post-COVID rents, 14 stores will close. The impact of these store closures is expected to be minimal as customers are directed to nearby stores and the online channel.

Mosaic Brands Ltd (ASX: MOZ)

The Mosaic Brands share price has gained 230% from its March low of 23 cents. The company is currently trading at 76 cents. Although this is an impressive gain, Mosaic Brands’ shares are still trading well below last year’s high of $3.06. The company closed stores in March but re-opened from mid-May. Through substantial work to accelerate the company’s digital offering during store closures, online sales increased by 80%. The company added more than 100,000 SKU’s and 20 categories during this period.

The ASX fashion retailer expects a FY20 EBITDA loss as a result of store closures and foot traffic declines. Mosaic expects second-half EBITDA loss to exceed the first-half of $32.7 million. The company cancelled its interim dividend following its earlier deferral announcement. Nonetheless, management expects the pandemic’s impact on its performance to be short-term, with a return to profit anticipated in FY21.

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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Kate O'Brien