City Chic share price jumps on 25% sales lift

Investors aren’t galvanised just yet, though.

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Key points

  • City Chic posted a trading update today for the period of December to April, ahead of two upcoming investor conferences 
  • The company has reportedly printed a strong gain in sales, whilst earnings remain flat year on year 
  • In the last 12 months, the City Chic share price has collapsed more than 42% 

Shares in City Chic Collective Ltd (ASX: CCX) are tracking higher on Wednesday following the release of its trading update for H2 FY22 to date.

This represents the 17 trading weeks from 27 December 2021 to 24 April 2022. City Chic is releasing the update ahead of the Goldman Sachs Emerging Leaders Conference today, and the Macquarie Australia Conference on 3 May 2022, where it will be presented at both events.

At the time of writing, the City Chic share price is trading 115 basis points higher at $2.63 apiece just after midday on Wednesday.

City Chic share price jumps on earnings momentum

Key highlights for the company during this period include:

  • The second half to date saw strong total sales growth at 25% year on year (YoY)
  • USA total sales growth of 47% in H2 FY22 to date
  • Evans is performing at pre-acquisition levels
  • Australian sales performing above last year, with online channels up 13% in H2 FY22 to date
  • Global partner sales growth of 465% in H2 FY22 to date

What else happened this period for City Chic?

Commenting on its performance in H2 FY22 to date, the company said it had delivered sales growth of 25% in that period.

Northern Hemisphere sales have grown to be almost 56% of the group’s entire sales, whilst website sales grew 26% in the US in that time.

City Chic mentioned that total US growth has widened to 47% in H2 FY22 to date, whilst European, Middle East and Africa (EMEA) sales have jumped 69%.

It also says that global partnerships are currently growing, with sales growth up 465% in H2 FY22 to date.

Meanwhile, Australia & New Zealand sales have curled up by 3% in the same time, “against a strong [H2 FY21] and in a challenging market due to the continued impact of the COVID-19 Omicron variant in the first few months of the second half.”

What’s next for City Chic?

The company appears optimistic based on projections in its presentation today. It expects H2 FY22 EBITDA “to exceed 1H FY22 EBITDA, subject to ongoing consumer demand in the key trading months of May and June”.

City Chic mentioned it has also produced a formidable counter-attack to the global supply chain disruptions through its proactive inventory management.

“We have the inventory ready, and in market, to drive growth in all regions, protecting demand in the balance of 2H and into Q1 FY23,” it remarked.

“Consistent with comments made at the 1H result, our inventory position will continue to build in [the second half].”

Net debt position, as at financial year end, is expected to be in the range of $6-12m, subject to demand and supply chain volatility. Post the Northern Hemisphere peak sales period, and as the supply chain challenges ease, we expect to release inventory and deliver strong positive cash flows in FY23.

City Chic share price snapshot

In the last 12 months, the City Chic share price has collapsed more than 42% and is now down 52% for the year to date. Across all major time frames, City Chic shares are down.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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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