City Chic (ASX:CCX) share price on watch on trading update

The City Chic Collective Ltd (ASX:CCX) share price is on watch today after revealing a FY21 trading update in the second half.

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The City Chic Collective Ltd (ASX: CCX) share price is on watch today after the retail business revealed a trading update.

What does City Chic do?

City Chic is a global apparel, footwear and accessories retailer for plus-size women. It has an established footprint in Australia, New Zealand and the US. It also recently entered the UK with the acquisition of Evans.

The company gave a presentation about its business and the current trading conditions.

In the 12 months to December 2020, it generated $209 million of global sales. Around 73% of those sales were online, up from 36% in FY18. It had 801,000 active customers at December 2020 and 42 million global online traffic visits over the 12 months to December 2020.

For the 2020 calendar year, 45% of sales were made in the northern hemisphere, up from 16% of sales in FY18.

Plus-size market growth

City Chic said that the plus-size market is forecast to grow by 7% annually. The average annual spend in plus-size is currently materially less than the rest of the women’s apparel market. The retailer pointed out that there is an increasing rate of plus-size women globally.

The ASX share was pleased that plus-size women have embraced shopping online. Current online sales represent 25% of total plus-size sales globally, so there’s still plenty of growth potential there. City Chic said there’s strong forecast growth in online channels in the global plus-size market, which is where City Chic is focused.

City Chic sees long-term growth potential

The retailer said there’s significant market share opportunity in the US$49 billion market. Cross-selling of City Chic products to Avenue customers is tracking very well. To capture this US opportunity, it’s expanding its marketing campaigns to grow its customer base and re-engage customers. City Chic is also expanding its existing marketplace partnerships and entering new ones.

In the UK there’s a market share opportunity in the US$7 billion market. The Evans acquisition accelerates this entry.

City Chic is targeting a market entry for ‘conservative value’ in Australia and New Zealand. The website development is underway, targeting a launch in the first half of FY22. It’s leveraging the product stream already designed for Avenue and Evans, whilst leveraging the existing infrastructure.

A market entry into Europe is the final part of the initiative to lead a world of curves. There’s a “significant” market share opportunity in the US$45 billion market. City Chic is currently trialling in Europe with its wholesale channel. The partner marketplace strategy in Europe is well-progressed with the launch expected in the first half of FY22.

Trading update

There has been “strong” positive comparable sales growth and strong customer base growth in the second half of FY21 to date. May and June are typically large trading months, so they are important.

The gross profit margin for all channels has now fully recovered since the higher levels of discounting in early and mid 2020 due to COVID-19.

It’s going to continue to invest in inventory to drive online growth globally as well as its partner business.

ANZ sales are strong. City Chic US website sales are now back to growth, driven by a strong rebound in the dress category in March 2021. Avenue.com is trading well with strong growth. US partner channel sales are still down due to COVID-19, however sales have been recovering. Evans has been fully integrated ahead of schedule and under budget, the COVID lockdowns and restrictions in the UK started to ease from April 2021.

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