City Chic FY26 EBITDA Up 92% Despite 3.1% Revenue Decline

Strong Earnings Growth Masks Revenue Decline

City Chic Collective Limited (ASX:CCX) posted a striking 92% jump in underlying EBITDA to $12.3 million for FY26, even as total revenue slipped 3.1% to $130.5 million. The earnings surge was fuelled by a 7.6% revenue increase in Australia and New Zealand (ANZ), offset by a deliberate 42.1% revenue contraction in the USA due to cautious inventory purchasing amid tariff uncertainties.

CEO Phil Ryan highlighted the company’s operational transformation, noting margin expansion to 60.6% and a $7.1 million reduction in the underlying cost of doing business despite inflationary pressures. "We have built a simpler, more profitable and more resilient business," Ryan said, underscoring disciplined cost management and strategic product improvements as key drivers.

ANZ Growth and Customer Engagement

ANZ remains the engine room for City Chic’s growth, delivering $113.8 million in revenue with comparable store sales up 5.6%. The group now boasts a record 517,000 active customers, with customer advocacy measured by a Net Promoter Score (NPS) climbing to 76. The company has increased average selling prices by 4.5% and expanded its value range to respond to consumer cost-of-living concerns, while also broadening size options to capture more market share.

Online sales in ANZ dipped 8% in the first seven weeks of FY27 as City Chic deliberately reduced promotional activity, focusing instead on profitable growth. Meanwhile, store traffic surged 14%, supporting an 11.4% rise in comparable store sales early in FY27.

USA Reset and Inventory Discipline

The USA business contracted to $16.7 million in revenue, reflecting a strategic pullback in purchasing during tariff volatility. This particularly impacted wholesale partner sales reliant on new product launches. However, fresh inventory has now returned to the market, and City Chic expects a return to revenue and margin growth in the first half of FY27, excluding wholesale channels.

Management pointed to early signs of improved US retail momentum following recent income tax changes affecting tips and overtime. The company is focusing on becoming the dress authority for curves, leveraging fit expertise and community engagement to fuel growth.

Balance Sheet Strength and Cost Control

City Chic ended FY26 with $5.2 million in net cash and an undrawn $10 million debt facility extended to March 2028. The company repaid all borrowings during the year and met the first covenant clean-down requirement for FY27. Inventory was tightly managed, falling 11% to $24.1 million, positioning the group with a fresh and optimised stock profile heading into the new financial year.

Cost savings were achieved across marketing (down 24%) and employee expenses (down 5.5%), despite wage inflation. The group also invested in AI-enabled buying and merchandising tools to improve product fit, reduce returns, and enhance customer experience.

Remuneration Reset and Incentive Alignment

In FY26, City Chic completed a buy-back and cancellation of prior long-term incentive plans, including loan funded shares and FY24 performance rights, due to a reassessment of performance hurdles. A new FY26 performance rights plan was introduced, linked to EBITDA margin improvement over a three-year period, aiming to better align executive incentives with shareholder value creation.

Risks and Strategic Focus for FY27

Despite progress, City Chic faces ongoing risks from macroeconomic volatility, competitive pressures, and regulatory challenges including ethical sourcing and litigation with NSW workers compensation insurer iCare. Management remains focused on profitable sales growth, customer retention, and operational efficiencies in FY27, with a keen eye on evolving consumer behaviour influenced by factors such as GLP-1 medication adoption affecting apparel demand.

With a stronger margin profile, disciplined cost base, and a clean inventory position, City Chic enters FY27 poised to navigate a challenging retail environment while pursuing sustainable growth.