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City Chic bounces on guidance upgrade
The City Chic Collective Ltd (ASX: CCX) share price is on watch as it told investors about its outlook for FY22.
City Chic’s FY22 update
The plus-size fashion retail business is holding its annual general meeting (AGM) and gave investors an update about how FY21 went, and its thoughts on the current financial year.
If you didn’t see the FY21 result, sales revenue grew by 32.9% and underlying net profit grew by 80.6%. Online sales increased by 49.3% and represented 73% of total sales. It also completed the acquisition of Evans in the UK. In July 2021, it bought European business Navabi.
FY22
City Chic said that there is still a lot of uncertainty in the market, so it decided to build up its inventory. Management said this was the right decision and it doesn’t foresee any stock shortages in the Christmas period.
The retailer said that it will continue to hold more stock until the sourcing and logistics issues settle down.
Management believes that the company is well positioned to navigate the conditions, capitalise on the recovery and execute on the long-term plans for the business.
While City Chic has suffered from store closures in Australia, the stores that have been open, plus the online channel, have in total delivered sales growth on the prior corresponding period.
With the high vaccination rate in Australia, the company is now hopeful that all channels will remain open and that there won’t be any more lockdowns.
In the US, its Avenue business is trading strongly at above pre-acquisition levels. Evans has had a mixed performance so far after a strong July to August, it has seen supply challenges into the rest of this half. Navabi is now live in City Chic’s systems.
It’s also live with a number of marketplace partnerships including Walmart (US), eBay (AU) and Very (UK). Market integrations are underway for DJs and The Iconic in Australia, Debenhams and Amazon in the UK, Zalando in Germany and Target in the US.
The company explained that the earnings split in FY22 will be different from historical trends as the business evolves, with the second half expected to be stronger than the first half of FY22.
City Chic also said that new runways of growth are being developed geographically, as well as through product expansion and additional partner channels.
Summary thoughts on the City Chic share price
I believe that City Chic is one of the most promising retailers on the ASX. But it is priced for that success as well. It will need to deliver good growth to not disappoint investors in the short-term.
However, over the next five to ten years, I think it can become a much larger business and that’s why I believe it’s worth putting on the watchlist of ASX growth shares.
