The City Chic Collective Ltd (ASX: CCX) share price is sinking, it’s down more than 5% after reporting its FY21 half year result.
The City Chic numbers
The business reported that its reported net profit after tax (NPAT) rose by 24.8% to $13.1 million.
This was driven by sales revenue increasing by 13.5% to $119 million and underlying EBITDA (EBITDA explained) rising by 21.8% to $23.3 million.
Same store sales, excluding Victoria, grew by 20.8%. The underlying cost of doing business (CODB) reduced to 41.6% of sales, down from 43.7% from last year – this was driven by a greater contribution from the lower CODB online channel including Avenue, as well as prudent management of head office and store costs.
City Chic revealed that its online sales soared by 42% year on year. It said that 73% of sales came from the online channel – up from 65% in FY20.
The business also disclosed that its global customer base improved 56% year on year. City Chic northern hemisphere sales represented 45% of total sales, up from 42% in FY20.
Commentary on operations
City Chic said that its fashion and dress categories were impacted by lockdowns and restrictions. The more casual Avenue brand traded well in the US. In Australia its customer-led model allowed the business to quickly move to more casual product. Australia and New Zealand sales have led the recovery.
The company is optimistic about a similar rebound in the fashion and dress categories in the US and UK later this year.
Management said that the Avenue business is growing strongly as it works to re-engage its sizeable customer base as well as introducing the City Chic brand to leverage the significant traffic.
The business continues to work on the Evans business acquisition, which was completed on 23 December 2020. Evans made £23.1 million of online sales in its last financial year. This acquisition is expected to add to earnings in the first full year of City Chic ownership.
Is the City Chic share price a buy?
City Chic said that in the first eight weeks of the second half of FY21, it has continued to deliver strong positive comparable sales growth.
The company looks interesting to me. The Evans acquisition could be really good if it can capture a lot of the online sales and even some of the physical sales that used to be done in the physical stores (which are being closed). The re-opening of the UK economy will be helpful.
I’m also excited by the prospect of marketplace partnerships in the UK, an expansion of the wholesale business and a market entry into Europe – also through market partnerships.
There are several growth avenues that City Chic can pursue. The lower City Chic share price represents a long term opportunity in my opinion.
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