Shares in plus-size women’s clothing retailer City Chic Collective Ltd (ASX: CCX) stormed to a new all-time high price of $4.24 on Monday. This means that, since it bottomed out at 71.5 cents during the COVID-19 panic sell-off in March last year, the City Chic share price has gained nearly 500%!
This puts its 12-month performance well ahead of more established ASX clothing retailers like Premier Investments Limited (ASX: PMV), which owns the Just Jeans and Peter Alexander brands.
What’s driving the City Chic share price?
Despite COVID-19 lockdowns forcing temporary store closures across Australia and New Zealand for big chunks of 2020, City Chic was still able to increase sales last financial year by pivoting towards online channels and tapping into the United States market.
City Chic also made a number of key strategic acquisitions in 2019 and 2020 that have helped boost its global presence. The company will be hoping these acquisitions pave the way for further growth in both Europe and the US – particularly as those economies recover post-coronavirus.
Now, to the financials. Despite the many market challenges, FY20 was a solid year for City Chic. Top line revenue increased by 31% year on year to $194.5 million, and global active customer numbers increased by 72% to over 650,000. Statutory NPAT came in at $9.7 million for the year, a drop of almost 40%, but this decline was due in large part to higher discounting to support customer numbers during COVID-19, as well as higher logistics and freight costs due to greater numbers of online sales.
The result showed how City Chic’s expansion into new markets was helping the company to continue growing its revenues during the pandemic. Although sales dropped by 4.8% year on year in Australia and New Zealand due to COVID lockdowns, sales in the Northern Hemisphere surged 179% higher. In fact, the Northern Hemisphere accounted for over 40% of City Chic’s total sales for FY20.
US sales were boosted by the October 2019 acquisition of the e-commerce assets of US plus-size retailer Avenue for US$16.5 million. This grew City Chic’s market penetration in the US and helped to double the company’s online sales in FY20.
City Chic had also hoped to acquire the e-commerce assets of US-based brand Catherine’s, but its bid was unsuccessful. However, although this deal fell through, in December the company announced it had acquired the e-commerce and wholesale assets of United Kingdom-based women’s plus-size brand Evans for 23.1 million pounds. Evans is a well-established UK high street brand with a 90-year history and a large customer base. For the 12 months leading up to August 2020, the Evans website had over 19 million visits and generated 23 million pounds in sales.
Forecast for FY21
Continued uncertainty surrounding the economic impacts of COVID-19 has made it difficult for City Chic to make any definitive earnings forecasts for FY21. However, the company has stated it remains focused on several growth initiatives for the year ahead. These include pursuing further acquisitions in the Northern Hemisphere, investing in the expansion of its online presence, and improving engagement with its Avenue customers in the US.
At the time of writing on Wednesday, the City Chic share price is trading at $4.10, down 1.4% for the day so far.
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Motley Fool contributor Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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