City Chic share price dives another 12% in dire week

Why are investors punishing this ASX retail share so much?

| More on:
asx share price fall represented by lady in striped tshirt making sad face against orange background

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • It has been a difficult week for City Chic shares after the result
  • The City Chic share price is now down 25% over the last month
  • In a trading update, it said that trading was “broadly flat” year over year, with momentum returning in August

The City Chic Collective Ltd (ASX: CCX) share price is currently down 10.3% at $1.79 today after trawling another 12% low for most of today. This means shares in the ASX-listed plus-sized apparel global retailer are now down by almost 30% since 24 August.

The ASX retail share has fallen hard after the release of the company's FY22 results.

What did City Chic tell investors?

The company reported that sales rose by 39% to $369.2 million, with comparable sales growth of 25.5%. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) went up 11.3% to $47.1 million. Underlying net profit after tax (NPAT) increased by 14.5% to $28.5 million.

City Chic also said that its global customer base increased 30% over the year to 1.4 million active customers, with growth in all regions.

Online comparable sales growth was 33.8%, with 82% online penetration. It said that 56% of its revenue came from the northern hemisphere. The 'partner business' grew to $30 million for FY22, with $22 million of that coming in the second half.

However, there was one factor that saw a big swing to a negative position. Operating cash flow sank from a positive $15.2 million in FY21 to negative $51.9 million in FY22. Management said there was a working capital increase of $90.3 million with an investment in inventory of $128.9 million.

City Chic said its inventory is expected to normalise in FY23. Inventory jumped from $67 million at 27 June 2021, to $125.7 million at 26 December 2021 and then up to $195.9 million at 3 July 2022. The company said that 48% of inventory is available for sale, while 52% is secured for release over future periods.

Management said that the inventory supported growth with reduced product cost and supply chain risk.

Outlook for FY23

City Chic said it expected another year of profitable growth, despite the ongoing global economic uncertainty. This was due to City Chic's increasing market share across geographies and channels and the investments in its distribution infrastructure.

The company said that to hedge against anticipated promotional activity within the 'plus market', it would implement price increases where appropriate to mitigate the risk of 'margin compression'.

In the first seven weeks of FY23, City Chic advised that trading was "broadly" in line with the prior corresponding period, with a return to positive momentum in August,

Australian stores were "trading above expectations and ahead of last year given the impact of store closures". Australian online sales were below last year in the first two weeks of July but have performed well since, trading above last year.

The US market was "volatile", with the City Chic website trading above last year, as better dressing demand remains "strong" and the Avenue website trading "below" last year, but showing week on week improvements. The UK "continued to show growth".

Its partner business has "continued to perform well" and is expected to drive incremental revenue growth throughout FY23.

City Chic share price snapshot

Over the last month, the City Chic share price is down more than 25%. And City Chic shares have tanked 70% since the beginning of 2022.

Motley Fool contributor Tristan Harrison 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 Scott Phillips.

More on Share Fallers

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why Cettire, Neuren, Peter Warren, and Qantas shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A mechanic rests his arms on a car he's working on, looking under the bonnet with a glum look on his face..
Share Fallers

Guess which ASX All Ords share is diving 11% to record lows today

A more cautious spender is throwing a spanner in the works of this automotive dealership.

Read more »

A woman with a sad face looks to be receiving bad news on her phone as she holds it in her hands and looks down at it.
Share Fallers

Why Boss Energy, Elders, Peter Warren, and Serko shares are sinking today

These shares are out of form on Tuesday. But why?

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Share Fallers

Why Genetic Signatures, Retail Food Group, Smartpay, and St Barbara shares are tumbling today

These shares are starting the week deep in the red. But why?

Read more »

A man in his 30s holds his laptop and operates it with his other hand as he has a look of pleasant surprise on his face as though he is learning something new or finding hidden value in something on the screen.
Share Fallers

ASX 200 insider buys up another $2,000,000 in company stock following Wednesday's 15% crash

This director took Buffett's advice to heart this week.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why AIC Mines, Fletcher Building, Nufarm, and Wesfarmers shares are dropping

These shares are having a tough finish to the week. But why?

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Share Fallers

Why BHP, Nufarm, Peninsula Energy, and Regis Resource shares are sinking today

These ASX shares are having a tough session on Thursday. But why?

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Share Fallers

Why Eagers Automotive, Inghams, Patriot Battery Metals, and Wildcat shares are sinking

These shares are having a tough time on hump day. But why?

Read more »