Why this beaten-down ASX share just rocketed 20%

Investors are sending this ASX small cap flying higher on Tuesday. But why?

| More on:
an elderly woman wearing boxing gloves raises one toward her face in a boxing pose while looking towards the camera with grey hair and spectacles on.

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

Down, but not out, this heavily sold-off ASX share just partially rewarded patient stockholders who've been holding on with hopes for a turnaround.

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.

Created with Highcharts 11.4.3City Chic Collective PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

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.

Motley Fool contributor Bernd Struben 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 Retail Shares

A smiling woman at a hardware shop selects paint colours from a wall display.
Retail Shares

Wesfarmers shares recently hit a 52-week high. Can they go higher?

This business continues to impress investors.

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
Retail Shares

Would Warren Buffett buy Lovisa shares right now?

Is this a sparkly opportunity?

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »

a thoughtful shopper with shopping bags wearing sparkly gold dress and matching shoes reclines on a chair with hand to chin in thought.
Retail Shares

Can Lovisa's new high profile CEO take Lovisa shares to new heights?

Is Lovisa about to embark on a new era of growth?

Read more »

A woman sits on sofa pondering a question.
Retail Shares

After soaring 244% in 5 years, how much further upside does Macquarie tip for Nick Scali shares?

The broker's expectations remain steady.

Read more »

Girl with make up and jewellery posing.
Retail Shares

Buying the dip: $5,000 invested in Lovisa shares a month ago is now worth…

It's been an outstanding first month for new Lovisa shareholders.

Read more »

Woman checking out new iPads.
Retail Shares

JB Hi-Fi share price sinks on sales growth figures

JB Hi-Fi shares are under pressure on Wednesday. But why?

Read more »

a close up of a motorcycle's front wheel and body on the open road with another motorcycle rider in the background cruising behind the leading driver.
Retail Shares

Up 100% in 11 months, can this small-cap ASX stock keep flying higher?

This business has delivered huge returns. Is it still a buy?

Read more »