In early morning trade, the City Chic share price is up 4.55% to 11.5 cents. Even with today's gain, the stock remains down about 12% over the past month.

Let's take a closer look at what the company reported.

Earnings rise as revenue holds steady

City Chic reported total revenue of $69.2 million for the half. This was down 0.4% compared with the prior corresponding period.

While sales were slightly lower, profitability improved. Underlying EBITDA came in at $6.5 million, up 86% on the prior period. The result reflects tighter cost control and improved gross margins.

Trading gross margin increased by 220 basis points to 62.2%. The company said this was supported by better product mix and more disciplined promotional activity.

Statutory net profit after tax (NPAT) remained a loss at $3.5 million. However, this was an improvement on the previous year.

Active customers across the group totalled about 503,000, broadly steady compared with the prior period.

ANZ grows while US sales fall

Performance differed across City Chic's regions.

In Australia and New Zealand, revenue rose 7.4% compared with the prior period. The company pointed to stronger full-price sales and disciplined trading through key promotional periods.

In the United States, revenue fell 31.7%. Management said this was due to a deliberate reduction in inventory in response to tariff-related uncertainty and a focus on improving long-term profitability. Lower fresh inventory had the biggest impact on partner sales, which depend on new product launches.

Overall inventory was down almost 10% compared with June 2025 and more than 20% compared with the prior period.

Online sales were stable, while partner sales were weaker due to the inventory strategy.

Cash position improves

City Chic ended the half with net cash of $5.4 million. This was up 84% from June 2025.

During the period, the company repaid $5 million in borrowings. A $10 million debt facility remains in place and undrawn. The facility has been extended to 31 March 2028.

The board did not declare a dividend for the half. The company said it remains focused on restoring sustainable and profitable growth.

Early positive signs from the second half

The company also provided an update on recent trading.

In the first 8 weeks of the second half, ANZ revenue was up 9% compared with the prior period. Gross margin dollars in ANZ increased 17% over the same timeframe.

In the United States, new product has been ordered ahead of a planned fourth-quarter relaunch. The company is also expanding its marketplace presence and adjusting its operating model to support long-term profitability.

City Chic said it remains focused on disciplined cost management, inventory control, and improving margins as it works to deliver sustainable earnings growth.

The post City Chic shares lift after first-half FY26 results appeared first on The Motley Fool Australia.

Whether that turnaround is sustainable remains to be seen.

But in midday trade today, beaten-down ASX share City Chic Collective Ltd (ASX: CCX) is shooting the lights out.

Shares in the plus-size women's clothing retail stock closed yesterday trading for 9.6 cents. At the time of writing, shares are swapping hands for 11.5 cents apiece, up a whopping 19.8%.

For some context, the All Ordinaries Index (ASX: XAO) is up 0.26% at this same time.

As you can see in the chart above, despite today's big lift, the ASX stock remains down a painful 73.9% since this time last year.

Here's what's driving the big turnaround today.

ASX share skyrockets on positive earnings growth

Investors are bidding up the ASX small-cap stock after City Chic released an unaudited H1 FY 2025 trading update covering the six months to 29 December.

The retailer reported half-year global sales revenue of $69.5 million. That's down 3.6% from H1 FY 2024, pulled down by a 22.4% decline in its Americas business.

But in a promising trend, City Chic reported that total global sales in the final six weeks of the half year were up 3.2% from the prior corresponding period. This was driven by a 9.0% boost from its Australia/New Zealand business.

Also likely driving interest in the stock today is the positive turn for the company's earnings. Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) are expected to come in between $3 million and $4 million for the half, up from an earnings loss of $4.4 million in H1 FY 2024.

And the company achieved ongoing trading margin improvements in all its operational regions, reporting 8.5% year-on-year gross margin growth.

On the balance sheet, Citi Chic reported it held a net cash position of $12.0 million as at 29 December. The retailer also had inventory valued at $32.1 million.

What did management say?

Commenting on the half-year results sending the ASX share soaring today, City Chic CEO Phil Ryan said:

We are very pleased with the turnaround in the Group's earnings, with the continued business moving from a loss of $4.4 million in the first half last year, to an expected EBITDA of between $3.0 million to $4.0 million in the current period.

This outcome reflects a combination of the recovery in the ANZ business, improved trading gross margins and the significant cost savings achieved, with further cost savings to be realised in the second half.

Turning to the US business, Ryan noted, "While US online performed largely in line with last year, the improvement in the US Partner business fell short of our expectations."

He added, "However, the 25% growth in City Chic branded products through our websites and partners at materially higher gross margins highlights the opportunity for our brand in the market."

The rebounding ASX share is scheduled to release its complete audited 1H FY 2025 results on 27 February.

The post Why this beaten-down ASX share just rocketed 20% appeared first on The Motley Fool Australia.

Shares in the women's clothing retailer closed yesterday trading for 10.20 cents. At the time of writing on Wednesday, shares are swapping hands for 13.25 cents apiece, up 29.9%.

Any guesses?

If you said City Chic Collective Ltd (ASX: CCX), give yourself a virtual gold star.

The City Chic share price is storming higher today following the release of the company's financial results for the full year ended 30 June (FY 2024).

Here's what has investors excited about the ASX retail share.

City Chic share price rockets as losses narrow

• Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) loss of $8.4 million, a 47.3% improvement on FY 2023 earnings losses
• Sales revenue of $131.6 million, down 28.3% year on year
• Inventory down 42.8% from FY 2023 to $30.7 million
• Statutory net loss after tax from continuing operations of $38.4 million

What else happened with the ASX retail share in FY 2024?

Although City Chic's core financial metrics remain largely negative, investors are bidding up the ASX retail stock based on its improved earnings performance over FY 2023 and brighter outlook for FY 2025.

"The result for FY24 reflects a year of business transformation, including decisive actions that were taken to streamline the business and focus on our high-value City Chic customer base and product mix in ANZ and the US," City Chic CEO Phil Ryan said.

Over the 12 months, the ASX retail share divested Avenue and Evans. The company said this has simplified its operations, unlocked cost savings, and allowed it to refocus on the City Chic customers in ANZ and the US.

City Chic also successfully completed an equity raise of $14.4 million in FY 2024, with an additional $3.1 million received in July, the first month of FY 2025.

As at 30 June, City Chic had a net cash position of $3.9 million.

What did management say?

Commenting on the results sending the ASX retail share rocketing today, Ryan said:

The divestment of Avenue enabled us to simplify our brand portfolio and refocus on what we do best – delivering high-quality, on-trend products that our customers love.

In the latter part of FY 2024 we saw strong positive momentum in average selling price (ASP) and gross margin contribution as inventory returned to appropriate levels and new product has been introduced.

In addition, we have delivered a material reduction in operating costs to align with demand.

What's next for the ASX retail share?

Looking at what could impact the ASX retail share in the year ahead, City Chic is targeting FY 2025 revenue of $142 million to $160 million and EBITDA post AASB 16* of $11 million to $18 million.

"We have a stronger balance sheet following the divestment of Avenue and the equity raise, and with our right-sized cost base and improved operational flexibility we are well placed to return to sustainable, profitable growth," Ryan said.

City Chic share price snapshot

Despite the big leap higher for the ASX retail share today, the City Chic share price remains down 67% over 12 months.

(*AASB 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Australian Accounting Standards Board) 

The post Guess which ASX retail share just shot up 30%! appeared first on The Motley Fool Australia.

In late trade, the ASX retail share is down 60% to 12 cents.

Why is this ASX share crashing 60%?

Investors have been selling the plus sized women's fashion retailer's shares for a couple of reasons today.

The first is the release of a very disappointing trading update that was announced last week. That update revealed that its group sales for FY 2024 are expected to be down ~30% to $187 million.

Things are worse for its forecast pro forma adjusted EBITDA from continuing operations. That is expected to be a loss of $9.3 million for the 12 months.

City Chic's earnings guidance excludes the Avenue and Evans businesses. The US based Avenue business is being sold to Fullbeauty Brands for US$12 million (~A$18 million), subject to working capital adjustments at completion. This compares to its purchase price in 2019 of US$16.5 million

Whereas the Evans business was sold earlier in the financial year. Once again, at a significantly lower price than what management paid to acquire it.

Management notes that these divestments align with the company's strategy of focusing on the core City Chic customer in ANZ and the US. Completion of the Avenue sale is scheduled to occur in July 2024.

What else?

Despite its abject trading performance and acquisition record, the ASX share has been able to raise money from investors through a capital raising.

However, unsurprisingly given the state of the company, it was forced to do so at a huge discount to the prevailing share price.

This morning, City Chic announced the successful completion of its institutional placement and the institutional component of its entitlement offer. In total, raised proceeds of $14.6 million (before costs) at a 50% discount of 15 cents per new share.

The release notes that the placement and institutional entitlement offer attracted strong demand from existing institutional shareholders of City Chic. In addition, it introduced a number of new investors to its institutional shareholder base.

The company's CEO, Phil Ryan, commented:

We are delighted with the exceptional level of support received from our existing institutional shareholders and very pleased to obtain the support of some new institutions. Their collective support positions us to build on the positive momentum our recent initiatives are generating going into FY25.

City Chic's shares are now down approximately 98% since the start of 2022.

The post Why is this ASX share crashing 60% on Monday? appeared first on The Motley Fool Australia.

Reports have also surfaced that a billionaire investor has just raised their stake in the struggling plus-sized women's clothing retailer, although this is unrelated to the halt.

Let's take a closer look at the news.

ASX retail stock halted

City Chic shares entered a trading halt today ahead of an announcement regarding two updates. The first concerns the potential divestment of the company's Avenue arm. The second is related to a new equity raise.

The company plans to complete a fully underwritten institutional placement and a pro-rata accelerated non-renounceable entitlement offer to raise capital.

The trading halt was requested to remain in place until next Monday. However, the company will likely reveal more about the planned disposal of its Avenue arm before then, stating:

City Chic expects to make an announcement to ASX in connection with the proposed divestment of Avenue and an equity capital raising to be undertaken by way of a fully underwritten institutional placement and a fully underwritten pro-rata accelerated non-renounceable entitlement offer of new fully paid ordinary shares in City Chic.

If the company makes such an announcement before Monday, trading of its shares will likely resume.

As for the billionaire investor, according to The Australian, Brett Blundy has just increased his stake in City Chic. Blundy's BBFIT Investments recently acquired 3.3 million shares, boosting his ownership to 11.3%.

His latest purchases were confirmed in an announcement last week, bringing his stake up from 9.9% at the end of March 2023. Back then, speculation was that Blundy would drastically increase his stake after raising it to the 9.9% level.

Foolish takeaway

City Chic's focus is in the plus-sized fashion business. The company differentiates itself in this segment across the Australian, South African, European and New Zealand markets.

It has brands such as Navabi, Evans, its namesake City Chic, and the potentially soon-to-be divested Avenue under its wings.

Analysts at Bell Potter remain optimistic about City Chic, maintaining a buy rating with a price target of $0.62.

Billionaire Brett Blundy's increased stake in the company has some speculating that it could signal new confidence in the retailer's potential.

This would be welcomed since, in the last 12 months of trade, shares in the ASX retail stock are down 9% and have underperformed the benchmark by 16% in the last year.

Meanwhile, year to date, the City Chic share price has slipped 45% into the red, having collapsed from former highs of 60 cents on 13 February.

The post Billionaire boosts stake in beaten-up ASX retail stock appeared first on The Motley Fool Australia.

But which ASX retail shares are in the buy zone right now? Well, six that analysts at Bell Potter are bullish on are listed below.

But first, let's take a look at what the broker is saying about the sector. Commenting on the retail sector, Bell Potter said:

We make earnings changes to LOV & TPW driven by medium to long term revisions and PFP as we factor in the acquisitions announced yesterday. We also increase our target earnings multiples for LOV & UNI which see our LOV, UNI, TPW & PFP price targets increasing 17%, 9%, 6% and 2% respectively. We've seen the Consumer Disc. sector (ASX200) testing its 10-year median P/E multiple (20.5x) back in Jul-23, however materially re-rating since then towards a high point in late Mar-24 (25.8x), and thereafter a correction back to 22.5x.

In this backdrop, we identify key opportunities where the valuations are well supported by distinctive growth traits and also clearly identifiable large TAM opportunities. Our key picks are the two global rollout names, LOV & PMV and also AX1 & UNI given the potential income tax cut benefit from 1Q25 to the younger consumer demographic and short-term catalysts for UNI associated with fast-approaching supportive comps.

Let's now take a look at six ASX retail shares that the broker is recommending as buys. They are as follows:

Accent Group Ltd (ASX: AX1)

Bell Potter has a buy rating and $2.50 price target on this footwear retailer's shares. This implies potential upside 25% for investors from current levels.

Cettire Ltd (ASX: CTT)

This online luxury products retailer's shares could be great value following recent weakness. The broker has a buy rating and $3.01 price target on its shares, which suggests potential upside of 28% for investors.

City Chic Collective Ltd (ASX: CCX)

Bell Potter has a buy rating and 62 cents price target on this plus sized women's fashion retailer's shares. Based on its current share price of 28 cents, this implies that its shares could more than double in value from current levels.

Lovisa Holdings Ltd (ASX: LOV)

Another ASX retail share that the broker is bullish on is fashion jewellery retailer Lovisa. It has a buy rating and $36.00 price target, which suggests that they could rise of 15% for investors.

Premier Investments Limited (ASX: PMV)

Bell Potter thinks that Smiggle and Peter Alexander owner Premier Investments could be in the buy zone. The broker has a buy rating and $35.00 price target on its shares. This implies potential upside of 21% for investors.

Universal Store Holdings Ltd (ASX: UNI)

A final ASX retail share that could be a buy is Universal Store. Bell Potter has a buy rating and $6.15 price target on the youth fashion retailer's shares. Based on its current share price of $5.12, this would mean potential upside of 20%.

The post 6 ASX retail shares to buy this month appeared first on The Motley Fool Australia.

Among the ASX All Ords stocks reporting earnings results today is chemicals business DGL Group Ltd (ASX: DGL), whose share price dived 45.6% to a new 52-week low of 56 cents this morning.

This followed news of a 43% nosedive in profit in 1H FY24.

The DGL share price is currently 60 cents, down 41.75%.

Let's look at DGL's report as well as the earnings performances of two other ASX All Ords stocks today.

ASX All Ords materials stock DGL plummets 46%

DGL reported revenue of $217 million in 1H FY24, in line with 1H FY23, along with a 3% increase in underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA) to $30.4 million.

However, its statutory net profit after tax (NPAT) came in at $5.9 million, representing a 43% dive.

DGL Founder and CEO Simon Henry said unreliable weather forecasts and supply chain disruptions impacted first-half results.

Henry said:

We have taken corrective actions, and these disruptions are normalising, giving us confidence in the outlook.

DGL expects a stronger second-half performance, in line with typical annual seasonal trends.

The company said it has an intensified focus on managing costs and maximising efficiencies.

DGL is continuing to invest in growing its network and assets and improving its systems and warned this would lead to lower full-year net profit due to higher finance and depreciation costs.

However, the underlying FY24 EBITDA for the ASX All Ords stock "should be broadly in line with FY23".

The company reported an underlying operating cash flow conversion of 93%. Its net assets are worth $339.2 million, up 2% since 30 June 2023, and its net debt was $117.2 million as of 31 December 2023.

No interim dividend for City Chic shareholders

The City Chic Collective Ltd (ASX: CCX) share price tumbled 12.5% to 49 cents after the ASX All Ords plus-size clothing retailer reported sales revenue of $105.8 million in 1H FY24, down 29% on 1H FY23.

City Chic also reported an underlying EBITDA loss of $7.5 million.

The company said it expects to return to profitable trading in 2H FY24.

Phil Ryan, CEO and Managing Director, said the company had been focusing on rightsizing its cost base,
optimising its inventory position, and introducing new products to drive demand.

He said:

I am pleased to report that the revitalisation of our product assortment is delivering improving margin and sellthrough rates, particularly in stores.

Our cost reduction measures will deliver approximately $25m in annualised savings and mitigation, exceeding our initial targets.

While cost of living pressures are impacting transaction volumes, the feedback and sell-through on our new ranges has been encouraging and our new product is expected to support our return to profitable trading.

The ASX All Ords company will not pay an interim dividend "in light of continued market uncertainty and the Group's capital management priorities".

Alumina reports on a "difficult year"

The Alumina Ltd (ASX: AWC) share price is down 7.6% to $1.01 after the company released its full-year FY23 results.

Alumina owns 40% of Alcoa World Alumina and Chemicals (AWAC), which form part of Alcoa Corp's bauxite and alumina business segments.

Alumina reported a net loss after tax of US$150 million in FY23 compared to a US$104 million profit in FY22.

This follows AWAC reporting an EBITDA of US$165 million for FY23 compared to US$817 million in FY22.

AWAC's alumina production fell to 10.3Mt, down from 11.8Mt in FY22. The realised alumina price for FY23 was US$352 per tonne, with the cash cost of production very close to it at US$308 per tonne.

Once again, Alumina shares will not pay a dividend to shareholders. The ASX All Ords materials share hasn't paid a dividend since September 2022.

The company said 2023 was a "difficult year" due to lower production and higher costs.

However, progress on several fronts has been made in recent months, including confirmation of long-awaited mine plan approvals in Western Australia (WA).

AWAC has also chosen to fully curtail operations at the Kwinana refinery in WA and partially curtail operations at its San Ciprian refinery in Spain.

Alumina said:

Together with the ongoing focus on profitability improvement across all aspects of the portfolio, these initiatives provide AWAC with a strong foundation to create a significantly higher quality refinery portfolio.

As we reported yesterday, Alcoa has made a takeover bid for its minority joint venture partner. The Alumina board is currently recommending the proposal to shareholders.

The post Guess which ASX All Ords stock just crashed 46% on half-year earnings appeared first on The Motley Fool Australia.

Up 24% in earlier trade today, the women's clothing retail stock is currently trading for 53 cents a share, up 21.8%. That sees the ASX All Ords stock up an eye-popping 112% since the recent lows on 2 November.

Any guesses?

If you said City Chic Collective Ltd (ASX: CCX), go to the head of the virtual class.

Here's what's driving investor interest.

ASX All Ords stock lifts off on takeover potential

The City Chic share price looks to be taking off today after the company released its half year trading update for the six months to 31 December (H1 FY 2024) and responded to media speculations about potential interest in its North American business.

Starting with the potential acquisition of its North American business, the ASX All Ords stock said that it is "regularly involved in exploratory discussions with different parties regarding initiatives that could create value for its shareholders".

The company highlighted that "there is no certainty that any of these opportunities, including any potential sale of City Chic's North American business, proceed to a binding transaction".

Luminis Partners has been a long-standing adviser to City Chic on various projects.

Turning to the half-year update…

City Chic share price lifts amid improving margins

The ASX All Ords stock reported global sales revenue of $106 million for H1 FY 2024. That's down 29% from the prior corresponding period.

Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) for the six months came in at a loss of $7 million to $10 million.

However, the company reported a 10% improvement in margin in Q2 FY 2024 compared to Q1. Second-quarter revenue was also up from the first quarter, while costs were down following the company's strategic action plans.

The inventory overhang was also reduced. City Chic reported inventories were down 27% since 2 July, with some $40 million of inventory cleared.

Commenting on the results that look to be giving the ASX All Ords stock a healthy boost today, City Chic CEO Phil Ryan said:

In the first quarter our focus was on clearing our inventory position and delivering new, relevant product to support our key trading period and we did that successfully.

This is reflected in stronger sell through at improved margins in the second quarter, especially in our stores business, and we remain on track to return to profitable trading overall in the second half.

As at 31 December, the ASX All Ords stock had a net cash position of $3.5 million.

The post Guess which ASX All Ords stock just rocketed 24% on takeover interest appeared first on The Motley Fool Australia.

In fact, with a 4.4% intraday gain today, it's up a whopping 28.6% since Monday's close.

Any guesses?

If you said City Chic Collective Ltd (ASX: CCX), give yourself a virtual prize.

Shares in the embattled women's clothing retail stock closed Monday trading for 28 cents apiece. At the time of writing, shares are swapping hands for 36 cents apiece.

Here's what's piquing investor interest in the ASX All Ords stock.

What's boosting the ASX All Ords stock?

On the tail end of what can fairly be described as a horror year – hit by inflation, rising interest rates and excess inventories – the City Chic share price is rebounding amid investor optimism about the year ahead.

At the company's annual general meeting (AGM) yesterday, management said that after inventory right-sizing was completed in Q1 FY 2024, inventory was now at levels that reflected demand.

"With the right-sizing of inventory, we now have considerably more 'newness' in stores and online. These products are selling through well and at good margins," City Chic chairman Michael Kay said at the AGM.

The ASX All Ords stock has also been running a razor over its costs, with expectations to return to profitability in H2 FY24. In FY 2023, City Chic reported a net loss after tax from continuing operations of $45 million.

And, likely spurring ASX investor interest this week, the company's costs savings are running ahead of expectations:

According to Kay:

Cost savings are in excess of what we announced in August. Headcount savings are running $3 million better than the $6 million plan.

Annualised logistics costs have been reduced by $7 million through warehouse consolidation, and additional annualised savings have been renegotiated with suppliers to assist us achieve our target of fulfillment costs of 19% of revenue. We have also achieved operating cost savings of $2 million.

Kay said this had put the ASX All Ords stock "firmly back on the path to profitability".

The company ended FY 2023 with net cash of $11 million.

A sharp year-on-year improvement in average order value also looks to be boosting the City Chic share price.

"Our key metric of average order value has shown strong improvements in October and November and is about 10% above last year," CEO Phill Ryan said.

Cit Chic share price snapshot

As mentioned up top, the past 12 months have been a real horror year for the ASX All Ords stock as cash-strapped customers scaled back purchases at the same time the company was trying to downsize excess inventories.

Despite the big three-day rebound, the City Chic share price remains down 73% since this time last year.

The post Guess which ASX All Ords stock has rocketed 29% in just 3 days appeared first on The Motley Fool Australia.

While the All Ordinaries Index (ASX: XAO) is up a welcome 1% in late morning trade on Wednesday, this ASX All Ords stock is down a painful 7.7%.

Any guesses?

If you said City Chic Collective Ltd (ASX: CCX), go to the front of the virtual class.

Shares in the women's clothing retail stock closed yesterday trading for 52 cents. At the time of writing, the company's shares are changing hands for 48 cents apiece after earlier trading as low as 44 cents each. That represented a loss of more than 15%.

This comes following the release of City Chic's full financial year results for the 12 months ending 2 July (FY23).

Here's what ASX investors are considering.

City Chic share price tumbles on crumbling earnings

• Sales revenue of $268 million, down 15.8% from FY22
• Underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) from continuing operations loss of $24 million, compared to a positive $54 million in FY22
• Net profit after tax (NPAT) loss from continuing operations of $45 million, compared to a positive NPAT of $24 million in FY22
• Net cash of $10.9 million

What else happened with the ASX All Ords stock over the year?

The City Chic share price is under heavy selling pressure on the back of a difficult trading year for the ASX All Ords retailer.

Revenue took a big fall, with the company reporting that demand was volatile across each of its markets. This required heavy promotional activity to drive sales.

Earnings were hit by lower consumer demand in all the company's operating regions along with management's focus on clearing inventory. Inventory was reduced to $53.8 million over the year.

Faced with negative profits, the board again opted not to declare a dividend. City Chic last paid dividends in 2019.

FY23 also saw the ASX All Ords share complete a strategic review of its online and international businesses "to determine the most efficient path to profitable growth".

City Chic is targeting a return to 60% gross margins and optimised investment to maintain commercial inventory levels.

What did management say?

Commenting on the results sending the ASX All Ords share into a tailspin today, CEO Phil Ryan said:

The team has worked extremely hard to get our inventory back in shape and restore our balance sheet.

As part of our review process, we had the opportunity to sell the Evans business and exit EMEA which now gives us a clear run at the highly lucrative USA market while we consolidate our leading position in Australia.

What's next for the ASX All Ords stock?

Looking to what could impact the City Chic share price in the months ahead, the company said that it is seeing "strong sell through" of its new seasonal product in both markets as it transitions to better end ranges.

The ASX All Ords share expects demand to continue improving into Q2 FY24.

City Chich will also continue its cost reduction program through H1 FY24, aiming to maintain positive net cash at year-end.

The retailer is forecast to be loss-making in 1H FY24, but it expects to be trading profitably in the second half of next year.

"We have seen a strong response to our new product and expect to be back to profitability during the second half of FY24," Ryan said.

City Chic share price snapshot

The past 12 months have seen the City Chic share price crash a painful 71%.

2023 has seen the ASX All Ords share perform better, up 2% since the opening bell on 3 January.

The post Guess which ASX All Ords stock is diving 8% after sinking to a $24 million loss appeared first on The Motley Fool Australia.

City Chic is best known for selling apparel, footwear and accessories in ANZ and the US.

UK exit

The ASX All Ords share has divested its Evans business and the inventory for Europe, the Middle East and Africa (EMEA) to AK Retail Holdings.

As part of the company's strategic review to simplify and streamline the business, the company decided in light of the current economic conditions, the investment required to deliver profitable growth in EMEA would be better allocated to other parts of the business.

Under the agreement, AK Retail will pay City Chic a total cash consideration of £8 million. Net of transaction costs, which includes the closure of City Chic's UK warehouse. The consideration is around £6.4 million, or around $12 million in Australian dollar terms.

While City Chic has sold Evans, it can still sell under City Chic, Avenue and other non-Evans brands in EMEA in the future.

The closure of the UK warehouse which also supports the European operations means that the Navabi business will cease trading.

What will this do for City Chic?

There are three immediate benefits that the company pointed to.

First, it will strengthen the company's balance sheet.

Second, it will accelerate the reduction of its debt facility.

Third, it will further reduce the ASX All Ords share's inventory to "allow for a clean inventory position sooner than planned."

Giving further details, City Chic explained that the proceeds are being used for "working capital purposes" and to pay the remaining $1.5 million acquisition facility.

The company said its debt facility limit has been reduced to $20 million (from $30 million) and it will reduce by a further $5 million at the end of June 2024, which will reduce its funding costs.

CEO comments

The City Chic managing director and CEO Phil Ryan said:

The focus of the strategic review has been on our online and international businesses to determine the most efficient way of returning to profitable growth. We have seen a significant deterioration in the EMEA market over the past two years which has hampered our ability to sell our expanded product range, compounded by global supply chain constraints.

We are continuing with the rationalisation of our product offering, streamlining our supply chain and focusing on cost management. I am confident that we can return to a more agile operation that quickly responds to her changing needs and puts us in a much stronger position for when market conditions improve.

Upcoming FY23 result

City Chic said these steps are the outcomes of the strategic review that was announced in May 2023.

A further update on the strategic review will be outlined with its FY23 results on 30 August 2023.

The EMEA business will be treated as a discontinued operation in FY23, while the assets held for sale at the end of FY23 will incur an impairment of between $29 million to $31 million including closure and transaction costs.

City Chic share price snapshot

Since the start of 2023, the ASX All Ords share has risen by 30%, as we can see on the chart below.

The post Why is this ASX All Ords share leaping 25% today? appeared first on The Motley Fool Australia.

It's getting harder to find opportunities after a number of ASX shares have jumped in price. The first six months of the year saw a recovery for a number of larger businesses, while recently we've seen some positive jumps for smaller businesses as they report better-than-expected numbers.

For example, the two stocks I mentioned in this article about a month ago have gone up about 30% and 60% respectively. If only it were that easy to identify investment opportunities all the time!

Sometimes the biggest returns can be found when a stock has dropped considerably and recovers because the market was too pessimistic.

I'm not saying the two ASX shares in this article are the most likely to make big returns — they could just as easily go down. But I'll explain why I think they could do better than the market is expecting.

Inghams Group Ltd (ASX: ING)

Inghams is one of the largest poultry businesses in Australia. In the first half of FY23, it achieved group core poultry volume of 235.7kt, so we're talking about a lot of chicken.

The Inghams share price has dropped by around a third since September 2021.

This is understandable as the business has been dealing with inflation of costs across a variety of areas such as feed, fuel, transportation, packaging, and ingredients.

Inghams said in its half-year result that group net selling prices "grew strongly" during the first half. The company said it "remains focused on customer pricing levels 'appropriately' reflecting" ongoing feed and inflationary cost pressures and will "pass on further price increases as required".

I think the increasing prices will help the company's revenue and profit in the coming reporting periods, and it may be more positive than some investors are expecting.

The company also revealed it's going to invest in processing technology and automation, which will help future-proof the business. I believe this could help improve Ingham's profit margins.

According to profit estimates on Commsec, the Inghams share price is valued at less than 13x FY24's estimated earnings and less than 10x FY25's estimated earnings. It could pay a grossed-up dividend yield of 7.7% in FY24.

City Chic Collective Ltd (ASX: CCX)

City Chic is an ASX retail share that sells clothes, footwear, and accessories to plus-size women in Australia, New Zealand, the UK, Europe, and the US.

The City Chic share price has dropped around 80% in the past 12 months and more than 90% since September 2021. Ouch.

Its most recent trading update for the 45 weeks to 14 May 2023 showed sales were down 15% to $262 million, but up 16% compared to FY21.

However, it noted that sales in April and May were "improved" and returning to the trend seen in January and February, where revenue fell by 17%. This is indeed a better figure considering sales in the total second half to that time were down almost 26%.

In the first 19 weeks of the second half of FY23, the gross profit margin was down 18.8 percentage points.

It noted that UK operating conditions have been "exceptionally challenging and heavy discounting is required to drive demand".

But City Chic said that it's accelerating its inventory unwind. This is expected to drive cash flows and reduce the inventory balance at the end of FY23 to less than $100 million. This is forecast to further reduce in FY24 and continue to "drive promotional activity, with margins likely to remain soft" in the first half of FY24.

It's expecting to have a stronger inventory position in the second quarter of FY24, with 'newness' ready for the key trading period.

The ASX share has outlined a number of logistics areas where it's looking to reduce costs by more than $10 million per year.

City Chic is employing a number of strategies to try to return to profitable growth through FY24. I think if the company's commentary about profit is promising, then its share price could bounce. Certainly, at the moment, investors have very few expectations of the business.

The post Why I would snap up these 2 unloved ASX shares before they report next month appeared first on The Motley Fool Australia.

Retail sales were flat overall in the month of April, following very small increases in March and February.

The bottom line is that retail sales are slowing in 2023, as the impact of rising inflation and interest rates starts to flow through the economy.

ABS head of retail statistics Ben Dorber said:

Retail turnover has plateaued over the last six months as consumers spent less on discretionary goods in response to cost-of-living pressures and rising interest rates.

Spending was again soft in April but was boosted by increased spending on winter clothing in response to cooler and wetter than average weather across the country.

What does weaker spending mean for ASX retail shares?

Household consumption is worth about 50% of Australia's gross domestic product (GDP), so that's why retail sales are an important yardstick for our economic health.

The data also provides insight into the categories of retail that are receiving more of our dollars.

According to today's figures, only two categories recorded higher spending in April. They were clothing, footwear, and personal accessories (up 1.9%) and department stores (up 1.5%).

Household goods spending declined by 1% — its third consecutive monthly fall.

We also saw the first fall in food spending following 13 months of increases. Spending at cafes and takeaway outlets fell by 0.2%, and general food shopping declined by 0.1%.

On the market today, the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) is among six out of 11 market sectors on the rise, up 0.33%. Meantime the S&P/ASX 200 Index (ASX: XJO) is up 0.07%.

Here are the risers and fallers among ASX retail shares on Friday, and how they're trending year to date (YTD).

Rising retail shares on Friday

Some of the top risers among ASX retail shares today are:

• The Dusk Group Ltd (ASX: DSK) share price is up 3.3% to $1.10, but down 41% YTD
• The Domino's Pizza Enterprises Ltd (ASX: DMP) share price is up 3.2% to $47.16, but down 29% YTD
• The Lovisa Holdings Ltd (ASX: LOV) share price is up 1.4% to $21.37, but down 7% YTD
• The Adairs Ltd (ASX: ADH) share price is up 2.4% to $1.91, but down 16% YTD

Falling retail shares on Friday

Some of the fastest fallers among ASX retail shares today are:

• The Universal Store Holdings Ltd (ASX: UNI) share price is down 5.1% to $2.98, and down 43% YTD
• The City Chic Collective Ltd (ASX: CCX) share price is down 5% to 38 cents, and down 17% YTD
• The Mosaic Brands Ltd (ASX: MOZ) share price is down 5.3% to 18 cents, and down 36% YTD
• The Mighty Craft Ltd (ASX: MCL) share price is down 5% to 9.5 cents, and down 47% YTD

Hitting 52-week lows today

The ASX retail shares hitting 52-week lows today include Mighty Craft shares, which dipped to 9.3 cents in earlier trade, Redbubble Ltd (ASX: RBL) shares at 38 cents, and Elixinol Wellness Ltd (ASX: EXL) shares at 1.4 cents.

The post Soft spending: How ASX retail shares are responding to a weak month appeared first on The Motley Fool Australia.

So, what's weighing so heavily on the trio of stocks? Let's take a look.

3 ASX All Ordinaries stocks plunging on Monday

The first All Ordinaries stock suffering at the hands of the market on Monday is Galan Lithium Ltd (ASX: GLN). It's tumbling 10% right now to trade at $1.08.

It follows the completion of the company's institutional capital raise, which saw $31.5 million committed to the cause.

New shares were offered to intuitional investors for $1.05 apiece under the raise, with the cash going towards the company's Hombre Mueto West project. It will also help provide contingency funding for work at its Greenbushes South project.

Also in the red on Monday is the share price of City Chic Collective Ltd (ASX: CCX). The All Ordinaries clothing retail stock is tumbling 11.7% to trade at 34 cents right now.

It comes as the company updates the market on its debt facility, the progression of its strategic review, and its trading over the 45 weeks to 14 May.

Amendments to its debt facility are expected to provide the working capital necessary to return the business to profitable growth through the next financial year. Meanwhile, the company has decided to accelerate its inventory unwind.

Finally, City Chic revealed its sales slumped 15.2% year-on-year over the 45 weeks to 14 May to $262.2 million. Though that's up 16.4% on the same period of financial year 2021.

Finally, Tyro Payments Ltd (ASX: TYR) shares are the worst performing on the All Ordinaries right now. They're plummeting 18.2% to trade at $1.25.

The fall comes as the company announced Potentia Capital Management has scrapped takeover talks with the payments provider.

Potentia previously put forward a $1.60 per share bid, which was rejected by Tyro's board.

However, the private equity firm was granted due diligence in January in hopes pouring over the ASX All Ordinaries company's books would see it up its offer.

The post Monday blues: 3 ASX All Ordinaries shares crashing 10% or more today appeared first on The Motley Fool Australia.

In most cases, it's much easier to double a business in size from $250 million to $500 million than $25 billion to $50 billion. It becomes more difficult to grow a business the bigger it gets.

There has been a lot of volatility in the past 15 months surrounding retailers and how they're going to perform in the coming period. All of the inflation and higher interest rates could impact things. But, there could also be longer-term opportunities.

Shaver Shop Group Ltd (ASX: SSG)

The small-cap ASX share describes itself as an Australian and New Zealand specialty retailer of male and female personal grooming products. It wants to be the market leader in 'all things related to hair removal'.

It has over 120 stores across Australia and New Zealand selling a core product range comprising male and female hair removal products such as electric shavers, clippers and trimmers, and wet shave items. It also sells other items like oral care, hair care, massage, air treatment and beauty categories.

The company's recent gross profit margin strength has enabled the gross profit to increase, despite the slight fall in total sales in the first month and a half in the second half of FY23.

Shaver Shop believes it operates in a "large and growing market driven by changing consumer preferences and new product innovation". It thinks it can grow its market share, particularly in New Zealand, while generating good cash flow.

A key reason why I think it can outperform over the long term is because of how cheaply it's priced. Using the Commsec FY24 projected numbers, the small-cap ASX share is priced at 8 times FY24's estimated earnings with a grossed-up dividend yield of 14%.

City Chic Collective Ltd (ASX: CCX)

The City Chic share price has suffered around 80% over the past year. Many things have gone wrong for the business over the last couple of years.

Its FY23 half-year result was reportedly cycling a "strong prior corresponding period", with sales down 8%. The company made an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) operational loss of $3.4 million, while the statutory net loss was $27.2 million, with an additional inventory provision in the region of Europe, Middle East and Africa (EMEA).

But, I think the building blocks are there for a good earnings base in the future, with its presence in the US, UK and Europe.

The business says that it has strategic initiatives underway, targeting historical margins to deliver sustainable profit growth. That includes increasing the profit margin by lowering promotional activity in line with the "market improvement" and lower inbound logistics costs. It's also expecting to have a positive net cash position by the end of the current financial year.

The small-cap ASX share is also aiming to scale its international businesses and leverage the customer base and operating structures to "drive profitable growth".

Using the estimates on Commsec, the business is trading at 8 times FY25's estimated earnings.

The post 2 small-cap shares I rate to beat the ASX 200 in 2023 (and beyond) appeared first on The Motley Fool Australia.

City Chic shares are 2.29% in the red today and currently trading at 53.3 cents apiece. For perspective, the S&P/ASX 200 Index (ASX: XJO) is down 0.06% at the time of writing.

In the past year, City Chic shares have descended nearly 85%.

Let's take a look at the details of the recent investor interest in this ASX All Ords stock.

What's going on?

City Chic Collective is a global retailer that markets to plus-size women around the world.

Amid the major share price dip, billionaire businessman Brett Blundy has boosted his stake in the company from 8.6% to 9.9%.

BBFIT Investments (owned by Blundy) has acquired 3,094,791 new shares for a total cost of $1.39 million.

This follows Blundy increasing his stake in the company from 7.3% to 8.6%, according to a notice on the ASX on 23 March.

Blundy is the co-founder and current chairman of Lovisa Holdings Ltd (ASX: LOV) and founded private investment company BB Retail Capital (BBRC).

ANZ-Roy Morgan Consumer Confidence data, released yesterday, lifted by 1.6 points to 78.2 in the last week.

ANZ senior economist Adelaide Timbrell said:

Consumer confidence remained below 80pts for a fifth consecutive week, the longest time below 80pts since the start of the weekly series in October 2008. 

However, since this release, the RBA has hit the pause button on interest rate rises, which may be a good sign for retail shares next week.

City Chic share price snapshot

City Chic shares have climbed nearly 12% in the year to date and 18% in the last month.

This ASX All Ords share has a market cap of nearly $123 million based on the current share price.

The post This ASX All Ords stock is down 80% in a year, and one billionaire is buying up big appeared first on The Motley Fool Australia.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn't quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Flight Centre Travel Group Ltd (ASX: FLT) has returned to the top of the chart after its short interest rose to 12%. Short sellers don't appear to be giving up on Flight Centre despite its return to form in FY 2023. Revenue margin headwinds may be a cause for concern.
• Betmakers Technology Group Ltd (ASX: BET) has seen its short interest ease slightly to 11.6%. Competition and cash burn concerns could be weighing on this betting technology company's shares.
• Sayona Mining Ltd (ASX: SYA) has 10.7% of its shares held short, which is flat week on week. There are fears that lithium prices have now peaked and are about to decline materially.
• Core Lithium Ltd (ASX: CXO) has short interest of 10.1%, which is up week on week. As with Sayona Mining, continued weakness in spot lithium prices appear to have spooked investors.
• Megaport Ltd (ASX: MP1) has seen its short interest fall again to 9.3%. Short sellers have been targeting this network as a service provider after it reported softening operating trends with its results.
• Zip Co Ltd (ASX: ZIP) has short interest of 9.1%, which is up strongly week on week. Short sellers appear to be doubting this buy now pay later provider's ability to achieve its profitability goals.
• Liontown Resources Ltd (ASX: LTR) has short interest of 8.1%, which is up week on week. Concerns over material cost blow outs at the Kathleen Valley Lithium Project have been weighing on sentiment.
• City Chic Collective Ltd (ASX: CCX) has jumped into the top ten with short interest of 7.3%. This plus sized fashion retailer's abject performance and inventory management are likely to be behind this short interest.
• Lake Resources N.L. (ASX: LKE) has 6.9 % of its shares held short, which is flat week on week. Doubts over this lithium developer's technology and project funding are reasons why one short seller is targeting Lake.
• Vulcan Energy Resources Ltd (ASX: VUL) has short interest of 6.8%, which is down slightly week on week. This also appears to be down to lithium prices being tipped to fall materially in the next 18 months.

The post Here are the 10 most shorted ASX shares this week appeared first on The Motley Fool Australia.

And the market is reacting to their results in a big way. Let's take a look at the moves being made.

Right now, the All Ords is down 1.4% at 7,404.9 points.

3 All Ords shares making moves on half-year earnings

First up is the share price of All Ords online beauty retailer Adore Beauty Group Ltd (ASX: ABY). It hit a high of $1.075 today – marking a 4.9% gain.

Adore Beauty posted its earnings for the first half of financial year 2023 this morning, detailing $93.6 million of revenue – down 17% on that of the prior comparable period, which saw most of Australia locked down. Meanwhile, it revealed a $90,000 loss for the period.

The company also lowered its full year guidance, saying it no longer expects to see double digit revenue growth in the second half. That comes as inflation and waning consumer sentiment take their tolls.

Next, the share price of All Ords jewellery retailer Michael Hill International Ltd (ASX: MHJ) gained 4.4% to peak at $1.075 earlier today.

The company posted an 11% jump in half year revenue, sending it a record $363.4 million. It also declared a 4 cent per share interim dividend – up 14% year-on-year.

It expects its full year earnings before interest and tax to come in ahead of that of financial year 2022.

Making the biggest move of the three All Ords stocks is the City Chic Collective Ltd (ASX: CCX) share price. It plummeted 13.7% to a low of 50.5 cents earlier today.

As previously forecast, the plus size fashion retailer posted $168.6 million of revenue – an 8% fall as it cycled strong pandemic-related trading and struggled against lower consumer demand.

Its underlying operating EBITDA came to a $3.4 million loss while it posted a statutory net loss after tax of $27.2 million.

Looking beyond the first half, the company noted trading was down 17% year-on-year in the first seven weeks of the second half.

Though, it expects to deliver a positive net cash position by the end of this fiscal year. Currently, it has a $13.4 million net debt position.

The post 3 ASX All Ords shares on the move following results announcements appeared first on The Motley Fool Australia.

However, some pint-sized ASX companies could turn out to be the big-cap stocks of the future. And wouldn't it be great to invest in a few during the relatively early stages of their growth stories?

But with so many tiny ASX fish in the sea, how can investors sort the future big catches from the minnows destined to forever remain small fry?

For their thoughts, we decided to open a can of worms and ask our Foolish writers which ASX small-cap shares they reckon are worth reeling in right now. Here is what they said:

6 best ASX small-cap shares for 2023 (smallest to largest)

City Chic Collective Ltd (ASX: CCX), $127.56 million

Healthia Ltd (ASX: HLA), $191.79 million

Adairs Ltd (ASX: ADH), $414.87 million

Arafura Rare Earths Ltd (ASX: ARU), $1.28 billion

Platinum Asset Management Ltd (ASX: PTM), $1.35 billion

GUD Holdings Limited (ASX: GUD), $1.40 billion

(Market capitalisations as at market close on 20 February 2023)

Why our Foolish writers love these ASX small-cap stocks

City Chic Collective Ltd

What it does: City Chic is an Australian-born, plus-sized fashion retailer. It boasts 200 locations around the globe as well as multiple online channels.

By Brooke Cooper: The last 12 months have been rough on the City Chic share price. It's dumped almost 90% since this time last year amid inventory concerns and balance sheet pressure.

But I believe most of the bad news could now be behind the company. City Chic recently revealed its inventory levels are expected to come in below guidance for the first half, while its recently-amended debt facility should support the company's financial position.

Goldman Sachs is neutral on the stock due to concerns around continuously-compressed margins and a promotion-focused customer base.

However, I'm not averse to risk so think the current City Chic share price could represent a buying opportunity right now.

Motley Fool contributor Brooke Cooper does not own shares in City Chic Collective Ltd.

Healthia Ltd

What it does: With over 300 clinics across Australia and New Zealand, Healthia describes itself as a leading, diversified allied healthcare provider.

The company operates networks of optometry, podiatry, and physiotherapy clinics and also owns iOrthotics, a leading manufacturer of custom-made and 3D-printed foot orthotic devices for podiatrists.

By Tristan Harrison: The Healthia share price has fallen by around 40% since the start of 2022, making it great value, in my opinion.

I think the business is exposed to a number of helpful tailwinds, including an ageing population and a growing potential market (helped by the resumption of immigration).

This small-cap ASX share is also relying on an acquisition strategy to boost its scale. It's also working on improving the performance and efficiency of its existing clinic network. Healthia is planning to spend at least $20 million on acquisitions in FY23.

FY23 half-year revenue is expected to grow by between 31.7% to 37.1%, with like-for-like revenue growth of 5.4%. January 2023 showed "positive momentum" as well.

Motley Fool contributor Tristan Harrison does not own shares in Healthia Ltd.

Adairs Ltd

What it does: Adairs is an ASX retailer that sells homewares like linens, furniture, and decor items. It operates 170 stores across Australia and New Zealand as well as a growing online channel.

By Sebastian Bowen: This is one ASX small-cap share I think could have a big future.

The Adairs share price has had a bit of a rough trot over the past year or two, having fallen by around 50% from its pandemic highs. But this could well present a buying opportunity.

The company is still growing healthily, posting record revenues for the first half of FY2023, which were up 34.1% over 1H22's numbers. Its online channels have also been booming, with roughly 26.5% of all sales over the half done over the internet.

Perhaps best of all, Adairs currently has a fully-franked trailing dividend yield of around 7.5% on the table today.

Considering all of this, Adairs could well be a small-cap ASX retailer to consider right now.

Motley Fool contributor Sebastian Bowen owns shares in Adairs Ltd.

Arafura Rare Earths Ltd

What it does: Arafura Rare Earths is the rare earths developer behind the globally significant Nolans Project in the Northern Territory.

By James Mickleboro: I think Arafura Rare Earths could be an ASX small-cap share to buy right now. This is because of the potential for the Nolans Project to supply a significant proportion of the world's neodymium and praseodymium (NdPr) demand in the future.

These are critical minerals in the production of high-performance neodymium magnets, which are used in everything from mobile phones and electric vehicles to wind turbines and military weapons.

And with the company expecting demand to more than double from 2020 to 2030, and supply to remain constrained, I believe Arafura looks well-positioned to benefit from strong prices once it commences production.

Motley Fool contributor James Mickleboro does not own shares in Arafura Rare Earths Ltd.

Platinum Asset Management Ltd

What it does: Platinum Asset Management is an Australian-based niche investment manager focused on international shares.

By Bernd Struben: After a tough 18-month stretch, the Platinum Asset Management share price has seen a big turnaround in 2023, up by almost 30% year to date. I like buying into strength and believe the company can deliver more gains in the year ahead.

Adam Lund, head of trading at Spheria Asset Management, recently tipped Platinum to outperform. He told Motley Fool, "When you buy Platinum shares, you are investing in a very experienced investment team that manages $18 billion across strategies that have outperformed their direct competitors over most periods."

Atop potential share price gains, Platinum pays a 7.8% trailing dividend yield, fully franked.

Motley Fool contributor Bernd Struben does not own shares in Platinum Asset Management Ltd.

GUD Holdings Limited

What it does: GUD Holdings is an Australian-based company that manufactures and distributes a diverse range of products in the automotive aftermarket and water industries. With a history spanning 65 years, GUD has raised a slate of trusted brands including Ryco Filters, DBA brakes, CSM, Cruisemaster, and Davey.

By Mitchell Lawler: GUD Holdings is not a flashy company touting futuristic software. However, it does meet a valuable need by providing a host of aftermarket car parts.

A growing berth of brands continues to fortify GUD's pricing power, reputability, and top-line growth. In the company's latest half-year results, revenue increased a significant 56% to $517 million.

What I find particularly attractive about this company is its exposure to non-discretionary spending. Around 80% of GUD's automotive revenue is derived from wear-and-tear/replacement parts. I believe this bodes well for the company, in conjunction with a large number of registered cars in Australia and the rising average vehicle age.

I personally think GUD's assets and growth potential are currently undervalued. At present, the company trades at around 11 times estimated FY2025 earnings.

Motley Fool contributor Mitchell Lawler does not own shares in GUD Holdings Limited.

The post Top ASX small-cap shares to buy in 2023 appeared first on The Motley Fool Australia.

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In part two of this edition, we're rejoined by Adam Lund, analyst, head of trading & co-founder, Spheria Asset Management.

Motley Fool: The Spheria Australian Smaller Companies Fund and Spheria Australian Microcap Fund focus on the smaller end of the market. How do you see small-cap ASX shares performing compared to the big blue-chips in 2023?

Adam Lund: Small-caps dramatically underperformed large-caps in 2022. It's an asset class that tends to underperform during periods of economic turmoil as sentiment turns negative and investors look to reduce the liquidity risk in their portfolios.

But the good news for 2023 and beyond is that smaller companies are also an asset class with a well-documented history of strong outperformance during market recoveries.

In recent months, we have been seeing some exceptional value in small-cap ASX shares and starting to add some fresh names to the portfolio.

Given the lack of coverage of small caps relative to large-caps, the inefficiency in this market is much greater than what you see in large caps. Particularly at times like this, that provides active small-cap managers an edge to outperform their large-cap peers.

MF: Which ASX shares are you most bullish about for 2023?

AL: One company we're positive on is City Chic Collective Ltd (ASX: CCX). It's a retailer of plus-sized women's apparel, footwear and accessories in Australia, New Zealand, the United States, Canada, the UK and Europe.

The recent weakness in the City Chic share price came with the market betting on a potential capital raise as the balance sheet looked to be under pressure. This saw the shares trading at close to asset backing.

The weaker retail environment and excess inventory position has forced increased promotional activity which resulted in further gross margin compression. The company is now expecting a small loss in the first half of 2023.

MF: The half-year loss isn't concerning?

AL: We're taking a longer-term view on this business. We think management can work through the currently elevated inventory levels to take the balance sheet from a net debt to a net cash position.

Much like The a2 Milk Co Ltd (ASX: A2M) [discussed in part one of this interview], we have a long history of investment with CCX. We previously owned a substantial position post its spinoff from Specialty Fashion, before divesting most of the position as the stock re-rated with the international growth of the business.

We now think it's a great time to reacquire a position in what is a sound business trading at a very attractive multiple, and where the risk/reward is skewed in investors' favour.

MF: Any other ASX shares you think will outperform in 2023?

AL: One other ASX share we like that might surprise some readers is listed funds management company, Platinum Asset Management Ltd (ASX: PTM).

It's perhaps one of the most under-owned stocks in the Australian market. But when you buy Platinum shares, you are investing in a very experienced investment team that manages $18.1 billion across strategies that have outperformed their direct competitors over most periods.

And you're getting that for nine times EBIT [earnings before interest and taxes], with a net cash balance sheet and strong cash flow generation.

MF: Platinum is also popular with some income investors.

AL: Right, PTM pays a 6.5%, fully franked dividend yield and provides investors with cheap beta in a market that has started 2023 with strong positive momentum.

Recently we've seen investors starting to appreciate that the team's performance may start to strengthen flows into their funds. Investor flows in and out of funds management companies is a metric they live and die by.

Additionally, one of the firm's founders, Kerr Nielsen, recently stepped off the board. So the question is, can we expect the overhang of his stock to hit the market as the shares recover? A sell-down would see a large index upweight which would mean a large flow of passive capital back into the name.

***

Be sure to check in tomorrow for part three of our fund manager interview series with Adam Lund. You can read part one right here.

(You can find out more about Spheria Asset Management's fund offerings here.)

The post Two 'attractive' ASX shares set to outperform in 2023: fund manager appeared first on The Motley Fool Australia.