Thank you for standing by, and welcome to the City Chic Collective Limited FY twenty twenty-four results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Phil Ryan, Managing Director and CEO. Please go ahead.
Morning, everyone, and thanks for joining us. I'm Phil Ryan, the CEO of City Chic Collective. I'm joined today by Peter McClelland, our CFO, and James Plummer, who will be taking the role of interim CFO from the eighteenth of October, as we've separately announced today. I'll run through the presentation, starting with the business and strategic update, and then a brief look at the FY twenty-four financials, and then moving on to our outlook. Looking at slide three. We had strong positive momentum through the second half of FY twenty-four and have taken the necessary steps to get the business back to profitability in FY twenty-five. This slide shows the four key takeaways. We outperformed the pro forma underlying EBITDA forecast for FY twenty-four that we gave in mid-June by 10%, driven by margin improvements, showing the success of our strategy.
In FY 2024, we have completed the business transformation. This includes a City Chic brand and product refresh, a shift to focus on high-value customers that deliver strong margins. We reduced our inventory to normalized levels, purchasing only around 80% of the cost of goods sold. We have evolved our products to more versatile lifestyles. We divested of Avenue and Evans, moving on that low-value customer and the products associated with that. We've right-sized our cost base with AUD 20.3 million in cost outs, including a 50% reduction in support office headcount, delivering a 17% employee expense reduction in FY 2024. We have implemented the additional AUD 1.1 million headcount savings outlined in June, and we expect a further AUD 11.5 million or 14% annualized cost of doing business savings in FY 2025.
Our customer is responding well with our NPS at 72, and we did all of this inside 12 months. The third point outlines that the strategy is working and the actions are paying off. In the first eight weeks of FY 2025, we delivered 28% growth in trading gross margin dollars, driven by a 58% uplift in average selling price. These are the two key strategic measures, and we're already on an upward trend through the second half of FY 2024, hence our strategic confidence. Lastly, we've set the targets of AUD 142-160 million in revenue and 11-18 million in EBITDA. On current ASP trends, we can hit these revenue and profit numbers selling materially less unit volume than FY 2023 and even less than we did in 2019.
We do expect the second half to be bigger than the first half as conditions improve, with the USA recovering faster than Australia. Moving to Slide 5. FY 2024 was a year of transformation, and we are now set up to return to profitability. Our underlying loss was AUD 8.4 million, which is 10% better than the pro forma forecast from June. This was predominantly due to an increase in margin from 56.3% to 57.3%, showing stronger achieved margins than anticipated, which was pleasing. At a cost level, there was a variance in fulfillment due to an allocation of AASB 16 adjustment between continuing and discontinued business.
However, with the warehouse move in the USA, we are now on track to have fulfillment under 12% of revenue, and we have a variable cost base to work with any level of demand we're experiencing. We also had lower-than-anticipated employee costs due to headcount actions, and as I said, we announced today that the further AUD 1.1 million outlined in June have now been completed. Revenue was down 28%, with the store performance bright spot, and showed the strength of our brand in Australia. Our comp stores in the Q4 were down 5% and are now achieving growth in the year to date or the first eight weeks of FY 2025, up 10%. There were three key factors impacting demand globally. Firstly, the cost of living pressures on our customers led to a much smaller annual customer spend.
She's hurting, however, she stuck with us. Second, we didn't deliver product in the structures we would like until the end of the Q2 in Australia and into the Q3 in the USA. In FY 2024, we purchased around 80% of cost of goods sold as we finalized the sell-down of old inventory. Replacing our COGS this year with purchases and the additional newness this provides will have a huge impact on demand. Third was the USA warehouse move in the Q4, which led to almost no product drops in May and June, and then limited in July, impacting all channels materially through the busy summer period. Our net cash is AUD 3.9 million, with AUD 15 million from Avenue and AUD 3.1 million from the equity raise coming in after year-end, and inventory is at a normalized level. Moving to slide six.
Our strategic business transformation initiatives have been the key focus of the business as we look to drive revenue growth. This slide outlines the FY 2024 operational highlights. There are four key areas: customer, product, costs, and balance sheet. We're focused on the high-value customer that can deliver the margin needs of the business. In the customer focus, our achievements are: we have refreshed our brand and are talking in a different tone of voice to our customer. We have four hundred and eighty-one thousand customers spending AUD 226 annually. With that average annual spend becoming a key metric, as we have more customers now than we did in two thousand and nineteen, and back then, she was spending around AUD 340 a year, and I know we can get back to those levels.
We have targeted digital marketing efforts to further engage the high-value customer. We've increased our social media presence, with the focus to be where she is when she wants us to be there. Our high-value customer numbers are up 11% in FY twenty-four, showing the success of our strategic focus. As this continues, we will decrease the number of low-value customers that are bought into the promotion. We moved the majority of those low-value customers on through divesting of the Avenue business. But most importantly, we've continued to delight her and exceed expectations with our Net Promoter Score now at 72. In the product area, we've revitalized our product assortment to move with what our customer is demanding from us, through category and lifestyle planning and making our range more versatile. We have listened to her as she told us she's looking for more elevated essentials.
Accordingly, we've grown this part of our range to meet her needs. We are back to a culture of repeats and following the customer demand in season to maximize revenue and minimize promotional activity. To facilitate this, we've shifted our supply chain back to historical partners, allowing flexibility and reduced product costs. We've also reduced the per option volume, further minimizing promotion. We are operating a more flexible open-to-buy and are moving spend with demand in season. From all of these actions, we've increased our gross margin percent and average selling price materially, with the second half gross margin trading at 59% and average selling price up 49% on the prior corresponding period. The discounting, promotion, and inventory clearance has stopped. We've simplified our business, reshaped the entire cost structure to align with demand.
In FY 2023, the cost of doing business was AUD 132 million in total, and AUD 101 million for the underlying business. In FY 2024, we brought this down to 84.2 or 17%. These actions include the changing of our US fulfillment partner to make fulfillment variable to sales in the US and facilitate the return to under 12% of revenue, impacting FY 2025 mostly. Our headcount reductions, which are now finalized, and our headcounts below our FY 2019 numbers, with just over 75 people in the office, and this was over 150 in FY 2022, a circa 50% reduction. We have set a target to cut cost of doing business by 20.3 million dollars, with 85% of this already achieved.
This would mean a further AUD 11.3 million annualized of our cost base to get it to 72.9, plus inflationary pressures. We've strengthened the balance sheet by normalizing inventory, selling Avenue, implementing a AUD 10 million debt facility and an equity raise. Moving to slide seven. In the first 8 weeks of FY 2025, the positive momentum we saw in the second half of 2024 has continued as the strategy delivers a further uplift in gross margin dollars and average sale price. Our focus on new product that the customer is demanding and strong marketing campaigns with a refreshed tone of voice are working. Total gross margin dollars are up 28%, with trading margin above 61%, a huge 17.7 percentage points up on last year.
Revenue is down 9%, as the first eight weeks of FY 2023 was a period of high discounting to clear stock that drove unit volume and revenue, but not profitability. That is our goal now. At a gross margin level, comparative stores are up around 13%, with total stores' gross margin up 8%, even with the 11 closures. We're focused on stores and getting their recovery, and we're seeing material improvements in the per store revenue. However, they still have a way to go to return to what I would say is acceptable per store sales. The ANZ online business has driven large margin improvements, up 68% in gross margin on the prior corresponding period as we stop the inventory clearance. Revenue is only down 13% as the activity last year drove revenue. It will take time to recover customer in this channel.
However, it's positive to be so close to revenue at materially better margin and outlines the future opportunity. Traffic in the first eight weeks is up 25% as we implement our brand refresh, new tone of voice, and focus marketing efforts on the high-value customer. Conversion is more challenging due to cost of living pressures. However, this will come back. The USA gross margin is up 20%, with revenue down 13%, outlining the recovery we have made to trading and getting back to the CC USA business that was leveraged and very profitable. Our website in the U.S. is up 68% in gross margin dollars as we stop the outlet and clearance that plagued FY 2023, and partners are flat in both revenue and gross margin dollars, as they were a little impacted by the warehouse move and deliveries in July.
This recovery was driven by an increase in average sale price of 58% in the first eight weeks and is now back above 22 levels. This shows the customer sees the value in our product and will keep this momentum going. The average sale price is increasing in all regions and channels, with ANZ Online the highest. We've right-sized the business for the current demand. Our cost out program is on track. July and August achieved the cost targets. The new USA warehouse arrangements, mixed with higher average sale price, have brought fulfillments in line with target in July. Wages are already at the required levels, and in other costs of doing business, we have plans to implement the further reductions required. Our focus now is on driving demand through reacting to customer-led learnings around product in season that our more reactive supply chain facilitates.
We can make money at the current low sales levels. Then, as we recover revenue in FY 2025 and beyond, there is a huge upside with the opportunity to drive store numbers to 120% to deliver growth. Moving to Slide nine and a strategic update. Slide nine articulates our strategy in a consistent manner that shows the key metrics we are looking to manage and what our targets are. Most of the strategic highlights align with the operational highlights, as a good strategy should, and I'm glad that the metrics and actions are performing so well. As a recap, we're targeting 62% gross margin, which we've historically achieved greater than with a City Chic-only business, and cost of doing business at 50%, including 12%, including logistics at 12%. Sorry. Moving to Slide ten.
Business is dedicated to the 481,000 hers that we have in our EQ system and the many lapsed high-value customers that we are targeting now. Total customer numbers decreased in July and August, as we didn't drive discounting. From that, we have lost some of the low-value customers, with more of this to come as we focus on the higher-value customers and drive a higher ASP. This customer number, as I've said, is up 25% on 2019, which she was spending AUD 340 a year. In FY 2024, her spend was AUD 226, and this speaks to the opportunity for us to listen to our lady and deliver on her many lifestyle needs to drive average annual spend back to historical levels. Moving to slide 11.
This shows the positive trends in average sell price and margin are not recent. From the Q4 of FY 2023, we're able-- FY 2022, we're able to gradually lift ASP 62% and gross margin percent from 43% to 58%, and we achieved this through the strategic implementation of our product and branding refresh. We still have a long way to go. However, we've made material progress on what will turn this business around. In line with strategy, we are focused on a higher-value customer, which is impacting unit volumes. However, it is at the highest sell price and margin. Moving to Slide 12. This just shows a snapshot of the elevated essentials and some customer testimonials.
In our research, through the first half of 2024, we heard a lot that this was the lifestyle she wanted, and when we delivered it to her in April, demand was very strong. Slide 13 outlines the cost out, so I've talked about a lot. I'm committed to driving the cost base of the business to the correct levels, and we've now achieved this and will continue our work. Today, as I said, we announced a final reduction in headcount, and we have almost 85% completed the cost outs needed through FY 2025. Slide 15 outlines the financial results on a continuing basis against FY 2023 and the pro forma adjusted FY 2024 numbers outlined in June. We're now 10% up on that June forecast due to the higher trading margin, which shows the strength of the brand refresh and product changes. Excuse me.
With fulfillment costs increasing due to the allocation of AASB 16 between continuing and discontinued that I spoke about earlier, but really there is no increase in ongoing costs. Actually, with the move, it will decrease. This all shows the strength of our actions, and the big one is labor costs were AUD 900,000 less than we expected, delivering us a lower cost of doing business. I've consistently said that our path to recovery includes gross margin and logistics recovery and improvements. In FY 2023 to 2024, we saw huge uplifts in those measures. Margin went from 46.3% to 57.3%, an 11 percentage point increase. Logistics went from 33% to 17%, and with the new USA warehouse arrangement, I'm confident we'll hit the 12%. We're below that in July. Moving to sixteen.
Inventory is normalized, and we are in a positive net cash position with AUD 15 million from Avenue and AUD 3.1 million from the equity raise received in July. In FY 2024, we only purchased around 80% of COGS for City Chic, with a balance sheet, with a balance of sales, sorry, delivered from the older inventory. As I've said, we won't be doing this, and it gives me confidence in getting back our revenue and volumes. We have the continued support of our lender, with our multi-currency debt facility of AUD 10 million extended to December 2026, and financial covenants have been replaced by two clean downs, one of which we have achieved, and the other is within our budgeted cash flow in all scenarios. Moving to Slide 18. We are focused on delivering profitable growth that is sustainable in the long term.
We have a brand that has done this for 16 years, and we'll get there again in FY 2025. I expect the trading conditions to remain volatile. However, there has been a lot of commentary that interest rates will ease in the USA in the first half and Australia early in the second half. We expect to continue the very positive average sell price and gross margin trends through FY 2025. As I've said, I think it's key that we replace COGS, as it makes a huge difference to our demand. She loves the newness, and more importantly, we're able to respond to what she's telling us in season. With this and the continued successful implementation of our strategy, we set financial targets of AUD 142-AUD 150 million revenue and AUD 11-AUD 18 million in post-AASB 16 EBITDA.
With a recovery into the second half, especially in the USA, the revenue is expected to be greater than the first half. In the mid to long term, we see the plus market as a huge opportunity to drive revenue in what is a market that's expected to grow. All of our teams and our channels are focused on this higher value City Chic product and customer in this market, and really will go to now drive her annual spend. As I've said many times, I do see a store portfolio of around 120 locations within the next three to five years. To finish on slide 19, I want to reiterate the key points. We've outperformed the forecast from June by 10%. We've completed our business transformation, including a brand and product refresh, inventory reduction, divestments, and right-sized the cost base.
In the first eight weeks of 2025 have been strong, up 28% in gross margin dollars, and our targets are AUD 142 million-AUD 160 million in revenue and AUD 11 million-AUD 18 million in EBITDA. Before I finish, I want to acknowledge and say thank you to Peter for his contribution to us at City Chic over the last three years. You have seen us through the most tumultuous and volatile retail environment imaginable. With the restructuring now complete and a much leaner business, I support his preference to look for the next challenge. Peter, you've worked so hard and achieved so much with us. Culturally, you're an amazing presence in the office and a great support and partner to me. I know you'll be successful in whatever you put your mind to.
Also, I would like to welcome James Plummer, who will be taking the role when Peter leaves. James has been with us almost four years, just over four years, I should say, and recently as Deputy CFO. He comes from a retail apparel background, working in Europe with brands such as Tommy Hilfiger and Calvin Klein. He knows our business inside out and has the ability to drive a leaner finance team that will deliver outstanding results. James has been driving the cost out for the business and delivered an excellent result, as you've heard today. I look forward to working closely with you, James, to drive us back to profitability. Lastly, I would like to thank the shareholders for their ongoing support. Thanks, and I will now open up to questions.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Please limit your questions to one per person. If you wish to ask further questions, please rejoin the queue. Your first question comes from Craig Wolford with MST Marquee. Please go ahead.
Morning, Phil and Peter.
Hey, Craig.
Morning, Craig.
Can I just start with a question about the sales outlook? It's quite a wide range from the top to the bottom. What are the things that will influence, you know, each end, the bookends of that sales range?
Yeah, I think the recovery into the second half is probably the major one, Craig, and how that plays out, especially through the USA.
You know, I guess related to that, though, so what should we expect on store movements then in FY twenty-five?
Yeah, there'll be bits and pieces, Craig, but we're not looking to open a whole lot or close a whole lot in the year. There's one or two clearance stores still that need to go, but and then I think they may be replaced, Craig, but I'm not going to look for a big store rollout in 2025.
Okay.
I think it's recovering the continuing, you know, recovering the partner business in the U.S., recovering our website business in the U.S., and recovering our online business in Australia to more normal sales. I mean, the stores will get better, Craig. As I said, they're already at 10% comps now, and margin's better than that. And I'd expect that level and a bit more to continue, but you know, they do get a little easier in comps over the next ten months of the year. And Craig, really, what we've got to do is cement our brand positioning and our changed tone of voice that's gonna deliver this. You know, we've already seen huge success in the two key measures. Keeping them going is what will drive it.
You know, I said traffic's up 25% on our website, really showing how much I think we've come back to being a fashion authority in plus. I think, Craig, we went down a path of marketplace being everything to everyone, and I think we lost a bit of that fashion edge, and we're really trying to bring that back into both markets in Australia and America. And that really performing is where that range comes from.
Thanks, Phil. Thanks.
Thank you. Your next question comes from Chami Ratnapala with Bell Potter Securities. Please go ahead.
Yeah, thank you. Good morning, Phil and Pete. I think as a follow-up, maybe, just in terms of that, your expectation 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?
I think online in Australia has been. I think I said in my speech, it was 13% down, but up 68% in gross margin year on year. You know, we had a challenging year online last year as we really used it as the main clearance channel, and it did a great job for us. And I think our product delivery through quarter end of quarter two and into winter, I think we're probably not fashionable enough. We are holding onto a bit of, you know, the chiffons and the floral prints, and we're being a bit us, not a bit the market. As we've changed that and moved into the more versatile pieces, we've seen her responding well.
I think the pleasing part is that traffic in Australia, Chami, is up 25%, and we've focused on that and driving that, and more importantly, the right customer, not just, you know, a customer in traffic. So I'm very confident Australia can get back to you know a much stronger level than last year. The comps do become a lot easier 'cause we drove a lot of revenue in the first eight weeks. Secondly, the US really to be almost the same at 68% up in margin seventy.
It's really done a huge amount of heavy lifting in the first sort of eight weeks last year, and to be able to turn it around to get that customer spending at the right amount, and only just be down in revenue, to me, shows once we're in the full swing and we've got the marketing working with the product, that online in America would hopefully go back to sort of at least historical levels, if not more, through the second half.
Thank you for that.
Thank you. Once again, if you wish to ask a question, please press star one. Your next question comes from Owen Humphreys with Canaccord. Please go ahead.
G'day, guys, and well done on executing on the guidance statement. Just can you just talk through the pro forma cash balance of your business? I know there's a lot of moving parts just when the money from Avenue came in, when there's money coming through from the capital raising. Do I have it right, that the pro forma cash balances of June thirty, including those things, is around AUD 22 million? Net cash.
No, I mean, it's the net position at 30 June was AUD 3.9 million, with AUD 17.5 million drawn. And then post that, there's the recovery of the further capital raise for about AUD 3 million, and then the proceeds from the sale of Avenue that flowed in post year-end balance. So that's sort of the cash flows as they've sort of transpired.
Which is your eighteen plus four, Owen. So, yeah.
Which gets to the twenty-two.
Yes.
Yeah.
Correct.
Good one. And just around just the discounting. Obviously, the margin growth is strong, and we shouldn't extrapolate that for the full year, you guys giving guidance on that. But just when did the velocity of the discounting kind of slow down? My understanding was around the AGM is when you started to see positive signs on the margin front last year. Just-
Yeah, Australia was a little earlier, America around then. America really didn't through the first half last year. We continued it there, and it really didn't see it in the second half. Australia, ANZ was definitely July and August were heavy, but it sort of continued a bit in September, and it sort of normalized as we head into summer last year. So, you know, the AGM is a good midpoint of those two, saying Australia's a little bit earlier and America's probably into the second half. But the second half includes January and February, which were in both markets, fairly heavy discounted months last year.
Good one. I think the last one for me-
The other point to that, mate, I'll give you some more color, mate. We as we drop more ranges through January and February, they really landed in March, April in America, and sort of February in Australia. That's when we started to really see recoveries, but we did go pretty hard in that January, February time as well.
All right, good one. Thanks. And 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 AUD 31 million inventory, but AUD 37 million payables, how does that play out when we roll forward 12 months?
Look, look, we're not giving a cash guide. What we have, We'll say, Owen, is that our inventory is fairly normalized and that with the way we've received things, payables are, you know, there or thereabouts. We don't see major shifts.
Good one. Okay, thanks, guys.
Thank you. There are no further questions at this time. I'll now hand back to Mr. Ryan for closing remarks.
Thank you. It's great to see how we performed in this first eight weeks and really through the second half of FY twenty-four. I'm very confident with proper product deliveries and really the shift in the tone of voice and then the fashionability, and more importantly, in the brand as a whole in Australia, and getting back to not trying to sell low-priced products all around the world, but selling what we do well in Australia, and New Zealand, and America, that we've done since two thousand and ten in America, two thousand and six in Australia. I'm very confident we'll turn this business around. I want to say finally, thank you again to Peter, good luck to James, and thank you again to all the shareholders for your ongoing support.
That does conclude our conference for today. Thank you for participating. You may now disconnect.