Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- City Chic Collective Ltd (CCCHF, Financial) outperformed its pro forma underlying EBITDA forecast for FY24 by 10%, driven by margin improvements.
- The company completed a business transformation, including a brand and product refresh, and a shift to focus on high-value customers.
- Significant cost reductions were achieved, including a 50% reduction in support office headcount and a 17% reduction in employee expenses.
- In the first eight weeks of FY25, the company delivered a 28% growth in trading gross margin dollars, driven by a 58% uplift in average selling price.
- City Chic Collective Ltd (CCCHF) set ambitious financial targets for FY25, aiming for $142 million to $160 million in revenue and $11 million to $18 million in EBITDA.
Negative Points
- Revenue was down 28% in FY24, with store performance being a bright spot but overall demand impacted by global cost of living pressures.
- The company experienced fulfillment issues due to a warehouse move in the USA, leading to almost no product drops in May and June.
- Online revenue was down 13% in the first eight weeks of FY25, as the previous year's high discounting drove unit volume but not profitability.
- The company is still recovering from a challenging year online, with traffic up but conversion rates impacted by cost of living pressures.
- City Chic Collective Ltd (CCCHF) faces ongoing volatility in trading conditions, with a need to maintain brand positioning and recover customer demand in key markets.
Q & A Highlights
Q: Morning, Phil, and Peter, Let's start with the question about the sales outlook. It's quite a wide range from top to the bottom. What are the things that will influence each and the bookends of that sales range?
A: Yeah, I think the recovery in the second half, probably the major one, Craig, and how that how that plays out, especially through the USA.
Q: And I guess related to that, what should we expect on store movements then in FY25?
A: Yeah. There'll be -- it's in place as described, but we're not looking to open a whole or close a whole lot in the year. There isn't one or two clearance stores still that need to go, but -- and then I think they might be replaced, Craig, but I'm not going to the store rollout in '25. I think it's recovering the -- continuing -- recovering the partner business in the US, recovering our website business in the US, and recovering our online business in Australia to more normal sales.
Q: Maybe just in terms of your expectations for second half to be bigger? Maybe how is the online performance stacking for the first eight weeks? And then what gives you confidence that US online turns around faster than Australia in the second half.
A: I think what -- look, online in -- Australia has been I think I said in my speech, it was 13% down, but up 68% gross margin year on year. We had a challenging year online last year as we really used that as the main clearance channel. And I did a great job for us. And I think our product delivery through quarter end of quarter two and into winter, I think we are probably not fashionable enough. We are holding on to a bit of the chiffons and the floral prints and we're being a bit, ask not a bit in the market. As we change that and moved into the more versatile paces, we've seen her responding well.
Q: Can you just talk through the pro forma cash balance you've got business. I know, there's a lot of moving parts just when the money from revenue came in when there's money coming through from the capital raising, do I have it right that the pro forma cash balance as of June 30, including those things, is around $22 million, net cash?
A: No, I mean that the net position at June 30 was $3.9 million with [$17.5 million] drawn. And then, post that there's the recovery of the further capital raised about $3 million. And then the proceeds from the sale of Avenue that flowed in post yearend balance. So that's the sort of the cash flows that have sort of transpired.
Q: Just around the working capital balance, obviously, inventories, payables, I'm looking at here. Just how that will play out. If you fast-forward 12 months, obviously $31 million inventory, but $37 million payables. How does that play out when we roll forward 12 months?
A: Look, we're not giving a cash guide. What we will say, Owen, is that inventory is fairly normalized and that the way we've received things payables, they are thereabouts. We don't see major shifts.
Q: Just the discounting, obviously, the margins growth is strong and we can extrapolate that for the full year and of course, giving guidance on that. But just when did the veracity of the discounting kind of slowdown, minus anywhere around the AGM is when you started to see positive signs in the margin front last year.
A: Yeah, Australia was a little earlier. America around then. America really didn't through the first half last year. We continued it there, and really didn't save in the second half, we will saying ANZ was definitely July and August were heavy, but it sort of continued a bit in September and sort of normalize as we head into summer last year.
Q: How is the online performance stacking for the first eight weeks? And then what gives you confidence that US online turns around faster than Australia in the second half.
A: Online in Australia has been 13% down, but up 68% gross margin year on year. We had a challenging year online last year as we really used that as the main clearance channel. The traffic in Australia is up 25%. The US is almost the same at 68% up in margin 70%, showing a huge turnaround.
Q: Can you provide more color on the timing of the discounting slowdown?
A: Australia was a little earlier, America around then. America really didn't through the first half last year. We continued it there, and really didn't save in the second half. ANZ was definitely July and August were heavy, but it sort of continued a bit in September and sort of normalize as we head into summer last year.
Q: What are the key factors influencing the wide range in sales outlook?
A: The recovery in the second half, especially in the USA, is a major factor. The performance of our stores and online channels will also play a significant role.
Q: What are your expectations for store movements in FY25?
A: We are not looking to open or close a significant number of stores. There might be one or two clearance stores that need to go, but the focus will be on recovering our partner business in the US, our website business in the US, and our online business in Australia.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
