Tariff Shock Forces City Chic to Pause US Imports and Cut Costs, FY25 at Risk
City Chic Collective faces a challenging US market due to steep tariff hikes on Chinese imports, prompting a strategic pause on new stock and a revised FY25 revenue outlook. Meanwhile, its ANZ operations continue robust growth, balancing the Group’s overall performance.
- US tariffs on Chinese imports increased to 145% above historic rates
- City Chic pre-stocked Summer 2025 and Winter 2026 inventory to mitigate impact
- USA sales forecast for FY26 downgraded amid tariff-driven demand risks
- ANZ region grows 17% year-on-year, offsetting some US weakness
- Group targets lower end of FY25 revenue and EBITDA guidance range
Tariff Turbulence Hits US Market
City Chic Collective Limited (ASX: CCX) has revealed the significant operational challenges posed by the recent US government tariff increases on goods imported from China. With tariffs now adding a staggering 145% on top of the historic average duty rate of 27.5%, the Group’s US business, accounting for roughly 20% of total revenue and heavily reliant on Chinese-sourced products, faces a sharply altered cost landscape.
In a proactive move, City Chic accelerated the importation of its Summer 2025 range and a substantial portion of Winter 2026 stock ahead of the tariff implementation. This pre-tariff inventory is expected to sustain US operations through the second quarter of FY26, providing a crucial buffer as the Group recalibrates its supply chain and market approach.
Strategic Pause and Cost Controls
To manage the tariff shock, City Chic has paused further stock shipments into the US and trimmed marketing expenditures to baseline levels. The Group is also negotiating with suppliers to adjust the existing order pipeline and has implemented $1.5 million in fixed cost reductions within the US business. These measures, combined with a predominantly variable cost structure, aim to preserve a neutral contribution margin despite anticipated sales softness.
However, management acknowledges the difficulty in passing tariff-related cost increases onto consumers without dampening demand, especially given the current economic uncertainty and volatile consumer sentiment in the US market.
ANZ Growth Offsets US Headwinds
Contrasting the US challenges, City Chic’s Australia and New Zealand (ANZ) operations continue to perform strongly, with a 17% increase in revenue year-on-year and a 21% rise in comparable store sales. The Group’s omni-channel model benefits from positive traffic growth both online and in physical stores, including the successful launch of a new contemporary store format in Wetherill Park.
This regional strength provides a vital counterbalance to the US market’s volatility and supports the Group’s overall financial health.
Revised FY25 Outlook and Forward Strategy
Reflecting the tariff-induced uncertainty and mixed trading conditions, City Chic has adjusted its FY25 financial targets to the lower end of its previously guided revenue range of $137 million to $147 million and EBITDA range of $8 million to $12 million. The Group cautions that ongoing volatility could further pressure results.
Management remains focused on executing its strategic priorities: driving sales growth, protecting margins, and delivering cost efficiencies. The option to exit the US market with minimal cost remains on the table should tariffs render the business uncommercial in the medium to long term.
Investors will be watching closely as City Chic navigates these external headwinds while leveraging its flexible cost base and strong ANZ momentum.
Bottom Line?
City Chic’s nimble inventory and cost strategies will be critical as it confronts tariff-driven uncertainty in the US while capitalising on ANZ growth.
Questions in the middle?
- How will ongoing US tariff negotiations influence City Chic’s medium-term US strategy?
- Can City Chic sustain margin neutrality if tariffs persist or increase further?
- What pricing strategies might City Chic adopt to balance tariff costs and consumer demand?
