All eyes will be on the City Chic Collective Ltd (ASX: CCX) share price today after the company reported its FY21 half-year result.
City Chic is a global retailer of plus-size apparel, footwear and accessories for women. It has websites and wholesale agreements for the northern hemisphere, with a large physical store network in Australia and New Zealand.
FY21 half-year highlights
City Chic reported that half-year sales increased by 13.5% to $119 million. It achieved comparable sales growth of 20.8% excluding Victorian store closures, or 12.7% including the store closures.
Online sales continue to grow strongly. Digital sales grew 42% and represented 73% of total sales. In FY20, online sales made up 65% of sales and in the first half of FY20 online sales were 53% of the total. US online sales contributed $45 million of sales, partly thanks to the Avenue acquisition.
There was also growth of its northern hemisphere business. Sales in the northern hemisphere made up 45% of total sales, up from 42% in FY20. However, wholesale and marketplace sales were down $6.4 million because of COVID-19 challenges for its US partners. The company also said that revenue was impacted by the strengthening of the Australian dollar as well as the closure of 14 stores in June 2020 due to some landlords wanting too much rent.
City Chic reported that its global customer base increased 56% year on year to 801,000 active customers.
The gross trading profit margin, excluding fulfilment costs, declined 70 basis points (0.70%) to 61.2% because of the shift in channel mix to online and full period contribute of the lower gross margin of the Avenue business.
The underlying cost of doing business reduced to 41.6% of sales, down from 43.7% last year. This was helped by a bigger contribution from the lower-costing online channel as well as cost management of head office and store costs.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 21.8% to $23.3 million. The EBITDA margin improved from 18.2% to 19.6%.
Statutory net profit after tax increased by 24.8% to $13.1 million. The normalised operating cash flow was $21.5 million, up 25.7%.
UK acquisition
City Chic completed the Evans acquisition on 23 December 2020, which it bought for £23.1 million. It has acquired the e-commerce and wholesale businesses. It's a UK market leader in the plus-size apparel and footwear space. In the year to August 2020, it made £23 million of online sales whilst the wholesale business generated £3 million of sales.
The City Chic share price has risen more than 26% since announcing this acquisition.
Financial position and dividend
City Chic said it had no debt at the end of the half-year, with $83 million of cash. It said it's well positioned for further organic growth as well as acquisition opportunities.
Due to the potential opportunities to accelerate growth and COVID-19 uncertainty, City Chic's board decided not to pay a dividend. It will review the idea of paying a dividend at the full year result.
FY21 outlook
In the first eight weeks of FY21, City Chic said that it has continued to deliver strong positive comparable sales growth.
It will continue to focus on growing its northern hemisphere businesses, particularly in the UK and Europe. The company also plans to introduce a conservative product for the Australia and New Zealand market.
