City Chic Collective (ASX:CCX) reported a sharp improvement in first-half earnings as management highlighted progress on product, customer focus, and cost reductions, while outlining plans to reinvest in inventory to rebuild momentum in the United States.
Profitability improved on cost discipline and margin gains
Managing Director and CEO Phil Ryan said first-half EBITDA rose 86% to AUD 6.5 million from AUD 3.5 million, attributing the improvement to strategic actions across customer and product, alongside “disciplined execution” of the company’s cost-out program.
Ryan said the business is now operating with a simplified model that management believes can be leveraged to drive profitability as it works to return to stronger revenue growth and sustain expanded gross margins.
Product overhaul led to intake delays, but supported stronger sales quality
Ryan said City Chic has “comprehensively overhauled” its product development process, including greater rigor in design and quality control, as part of delivering on its “Cut for Curves” brand promise. He noted the changes initially slowed the intake of Australia and New Zealand summer product, which affected first-half revenue “as we brought our factories on the journey with us.”
Despite the deliberate shift, Ryan said Australia and New Zealand achieved a 10.1% increase in trading gross margin dollars, helped by a 6.1% increase in average sale price. He added that summer performance in Australia reflected progress in the assortment, and the company expects stronger sell-through in the Australian and New Zealand winter season as it incorporates learnings.
Plummer said the trading margin improvements in ANZ reflected higher sell-through of full-price product and a more disciplined promotional approach, alongside continued development of product ranges. Ryan also said trading gross margin for the group increased 220 basis points to 62.2%, exceeding a 62% target, and that the cost of doing business improved to 51% from 54% in the prior corresponding period.
U.S. sales declined on deliberate inventory pullback; contribution remained profitable
In the United States, Plummer said revenue fell 31% to $9.7 million, largely due to a deliberate reduction in purchasing in response to tariff-related volatility. He said the impact was most evident in the partner channel, which “relies heavily on new product launches.”
Even with fewer new products, management emphasized that promotional discipline helped lift gross margin by more than four percentage points in the U.S. versus the prior period. Plummer said that margin improvement, combined with the local variable cost base, enabled the U.S. business to still make a profitable contribution to the group.
Ryan told analysts that U.S. performance held up “way better than I expected” despite “minimal to basically no newness.” He said new product would begin flowing around March for the U.S. summer season and build through April, May, and June, which he described as a stronger seasonal period for the business. He also noted the company still has “almost 50,000 active customers” in the U.S. and plans to reactivate and retarget them using learnings from Australia and New Zealand.
Cash flow, balance sheet, and facility extension
Management highlighted improved cash generation and balance sheet flexibility. Ryan said City Chic delivered AUD 10.1 million of positive operating cash flow in the first half, while Plummer put operating cash flow at AUD 10 million for the half, citing disciplined working capital management and improved operating efficiency.
Ryan said the company’s cash position was AUD 5.4 million with an undrawn AUD 10 million bank facility. Inventory fell 21%, which management tied to the strategic pause in U.S. purchases amid tariff volatility. Plummer said ANZ inventory remained “in good shape,” with improved stock turns and a healthy mix of new and seasonally relevant product.
Plummer said the company fully repaid all drawn debt during the period and extended its debt facility through March 31, 2028, adding that all clean-down covenants have already been met for FY 2026. Ryan also said the facility has been extended until March 2028.
Trading update: ANZ momentum, U.S. relaunch plans, and Amazon shift
Ryan said trading momentum continued into the third quarter. In the first eight weeks of Q3, Australia and New Zealand trading gross margin dollars rose 17% and revenue increased 9%, driven by full-price sell-through, improved product mix, and “tighter promotional discipline.” He cautioned that economic pressures and softer consumer sentiment are still affecting demand, particularly as interest rates rise, and said the company is maintaining a disciplined focus on costs, inventory, and execution.
In the U.S., Ryan said the company has invested in product to “relaunch into the summer season,” expecting this to drive profitable growth in the fourth quarter and beyond. On tariffs, he said current estimates suggest “a 5% reduction in duty” for goods entering the U.S. from China, and that the company is monitoring developments, but the change does not impact current plans or timelines.
Ryan also said City Chic has shifted Amazon from a wholesale partner model to a marketplace relationship to gain more control over range, price, and trading. He said the change would create short-term revenue challenges but is intended to support longer-term profitable growth. In response to analyst questions, Ryan said Amazon sales had been limited so far in the third quarter, with expectations to ramp activity in the U.S. in Q4, and that the impact would be felt in the partners revenue line in the second half.
Beyond near-term trading, Ryan outlined additional growth initiatives discussed on the call, including increasing the CCX casual diffusion range, implementing differential ranging by store, trialing an expanded size range (including sizes 10 and 12) in selected stores and online, and expanding categories such as footwear and sleepwear following a successful sleepwear trial in the first half.
Ryan also detailed the company’s use of AI across product and operations, including a partnership with an Australian retail AI startup called Aiception to support design, buying, and allocation decisions, along with AI tools used in marketing content, product recommendations, digital marketing optimization, and cybersecurity.
About City Chic Collective (ASX:CCX)
City Chic Collective Limited, together with its subsidiaries, operates as a retailer of plus-size women’s apparel, footwear, and accessories in Australia, New Zealand, and the United States. The company offers its products under the City Chic brand. It also operates a network of retail stores. The company sells its products through online websites and marketplaces; and wholesale stores. The company was formerly known as Specialty Fashion Group Limited and changed its name to City Chic Collective Limited in November 2018.
