The share price of City Chic Collective Ltd (ASX: CCX) is up 8% after the retailer announced its half-year result to 29 December 2019.
What is City Chic Collective?
City Chic is a global omni-channel retailer specialising in plus-size women's apparel, footwear and accessories. Its brands include City Chic, Avenue (which it recently acquired) and Hips & Curves.
It has 107 stores across Australia and New Zealand, it has websites across multiple websites operating in Australasia and the US, marketplace and wholesale partnerships with major US retailers such as Macys and Nordstrom, and a wholesale business with European and UK partners such as ASOS and Zalando.
What were City Chic's profit numbers?
City Chic's sales revenue was up 39% to $104.8 million with comparable sales growth of 11.3%. Online penetration of total sales was 53%, compared to 44% in FY19. The northern hemisphere now represents 29% of global sales, in FY19 it was 20%.
The gross profit margin was 54.2%, down from 60.4% in the first half of FY19. This was impacted by the sizeable shift in channel mix to online and inclusion of Avenue, which is a lower gross profit margin business. Online is more profitable at the net earnings line, but gross profit is lower because of fulfilment costs. The gross profit margin for the stores was maintained.
Underlying cost of doing business reduced to 36% of sales, down from 39.5% from the prior corresponding period, thanks to lower costs of online sales and keeping control of administration costs.
The underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 20.9%.
Reported continuing net profit increased by 6% to $10.5 million and total net profit grew by 5% to $10.6 million.
City Chic dividend
City Chic's Board decided that the best use of capital was to reinvest in the various global growth opportunities, so no interim dividend was declared.
City Chic outlook
The company continues to experience pleasing comparable store growth in the second half of FY20.
The Avenue acquisition has been accretive to earnings so far and the company is working on increasing the profitability of its e-commerce assets with a leaner operating model and better buying disciplines.
The coronavirus doesn't affect City Chic on the demand side of things, but production could be affected if disruption continues, although the Chinese government's imposed restrictions have started to lift in the regions where a majority of City Chic's factories are located. However, some of the factories are based in the Hubei province which remain closed. Sales and inventory are currently unaffected.
It continues to convert high-performing stores to larger format stores with new stores being rolled-out in Australia and New Zealand. It's adding partners in the US, Europe and UK.
It's trading at 25x FY21's estimated earnings with global earnings.
