Shares in speciality retailer City Chic Collective Ltd (ASX: CCX) have been crushing the ASX recently – up nearly 60% in the past six months.
Yesterday, City Chic’s shares reached an all-time high of $5.14, giving a market capitalisation of $1.17 billion.
CCX share price
What does City Chic do?
City Chic is a retailer that specialises in plus-size women’s apparel, footwear and accessories with operations across Australia, New Zealand, USA, Europe and the UK. Its multi-channel offering includes physical stores, online sales and a smaller wholesale market.
It operates through a variety of different brands. Recently, it acquired the e-commerce and wholesale business of UK-based Evans in a $46 million cash deal. Evans is another plus-size retailer that generated around $47.5 million of sales in FY20.
It also operates through another brand Avenue, an American e-commerce clothing chain that City Chic acquired in 2019 for US$16.5 million after the company filed for bankruptcy.
Recent financial performance
City Chic last updated the market in February with its H1 FY21 results. While the results disappointed the market on the day, they seemed to be positive, which confirmed its strong growth trend had continued over the past six months.
Topline growth of 13.5% saw group sales reach $119 million, with underlying earnings before interest, tax, interest, depreciation and amortisation (EBTIDA explained) jumping 21.8% to $23.3 million.
Online sales have continued to be a key growth driver behind the impressive results. Online sales made up 73% of total sales, up from 65% in the previous year.
Future outlook
In a recent presentation, management suggested the company still has a fairly small presence in the $58 billion plus-size market that’s forecast to grow at around 7% per annum.
While plus-sized women’s clothing has traditionally been serviced by department stores with limited sizing, City Chic is in a unique position as there’s still a limited number of independent brands.
Management indicated that structural trends such as increasing numbers of plus size women and online shopping trends will further catapult the company in an upwards direction.
Summary
City Chic seems to be executing well on its international growth strategy. It will be interesting to see how its recent acquisitions will add value to the overall business.
I like the structural trends working in its favour, which is what I’d look for as part of the Rask investment philosophy.
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