I would now like to hand the conference over to Mr. Phil Ryan, Managing Director and CEO. Please go ahead.
Thank you very much. Good morning, everyone, and thanks for joining us. I'm Phil Ryan, CEO of City Chic Collective , and I'm joined today by James Plummer, our CFO. This morning, I'm going to run through the presentation that we launched with the ASX this morning, starting with the key highlights. I'll throw to James for a view of the year's financials, and then I'll discuss the outlook before opening up to questions. Moving on to Slide 2, our $15 million EBITDA turnaround in FY 2025, going from a loss of $8.5 million to a profit of $6.5 million, is very pleasing and was driven by our strategic execution around customer, product, and the disciplinary reduction in our cost base. This year was a big step forward for City Chic , and we now have the platform to drive revenue to recovery.
The momentum in our Australia and New Zealand business has continued, with sales up 15.2% in the second half and 8.3% for the full year. All channels are delivering results from the successful implementation of our strategic plan. We've executed on our product improvements, and I'm pleased with our progress so far. However, I know we still have work to do. We're consistently learning from her and making in-season improvements in our assortment to drive revenue. We've sharpened the focus on high-value customers with pleasing increase in customer numbers, and we are now concentrating on driving higher annual spend while maintaining the momentum in our customer acquisition. Stores' momentum continued with comparative sales up 10.3% in the second half and online revenue up 17.8%. We delivered a 26% increase in website traffic in Australia and New Zealand, outlined in the success of our strategic brand refresh.
In what has been an unpredictable political and economic environment, the USA business is profitable. This is due to the strategic actions taken, which delivered us a lower and variable cost base that leverages our Australian operation to do its product to market. Sales of City Chic products were up 25% for the full year in the U.S., outlining the opportunity for our brand in the market. Our website grew 16.8%, driven by material average sale price increases through both starting price increases and reductions in discounting, with City Chic partner sales growing almost 30%. I'm very pleased with the USA result, given all of the tariff and other volatility we've seen in the market. As the USA is profitable, we've cautiously commenced purchasing inventory into the market again, although we do plan a further reduction in inventory in the first half of FY 2026.
We are working with our suppliers to mitigate the impact of the current tariffs and anticipate a 5% - 8% cost increase. We've seen retail prices raised by all competitors in the market from 20% - 30%, and to offset the cost increase, we are following this trend. Our trading gross margin dollars were up 9.1%, driven by higher average sale price, which was up 14.2%. Across these two key metrics, we have driven improvements in all markets and in all channels. We've achieved our cost-out targets of $22.3 million, and we have identified a further $1 million in cost-out that we're targeting to deliver in full in FY 2026. As I've previously stated, we will continue to right-size the business to align with the revenue, and we are now focused on driving revenue through our strategic actions.
The momentum in ANZ from the second half continued into the first eight weeks, with sales up 8.7% and the USA continuing to trade profitably. We're expecting to be cash flow positive in FY 2026, and this will commence in the first half. We have the liquidity to deliver on our strategic momentum and execute our growth plans. Moving to Slide 5, revenue was $134.7 million, up 2.3% on the prior corresponding period. Trading gross margin was up 350 basis points to 59.7%, making strong progress towards our 62% goal, and this step forward in margins is very pleasing. Our customer base is growing. We now have 502,000 customers, 54% of which are high value. We are focused on increasing annual spend through greater frequency. We only need it to return the levels we've seen just a few years ago to drive material revenue growth.
She has stayed with us and will spend up when she's feeling more confident. We've stabilized the balance sheet with $8 million in cash and $5 million undrawn on our bank facility, and we have the liquidity the business requires. Our inventory controls and improved buying process of delivery, with 12% less inventory while still delivering sales growth. Moving to Slide 6, in FY 2025, traffic was up 14% on the prior corresponding period. We delivered this result through tactical advertising, focused on winning back our high-value customers through all touch points in line with our strategy. The momentum in the key product metrics has continued, with sale price up 14% and, very pleasingly, the sale through up 18% on the prior corresponding period for our product. I know we still have work to do, but it's great to see both of these metrics going the right way.
It takes time to make the product changes, and with our new team now having a full season behind them, they've crystallized on the learnings, and we are seeing the results. Our core and repeater assortment is now delivering over 50% of our revenue. Our girl knows what fits her body and wants consistency and predictability in our range, and we're delivering on these shapes and fabrications she loves. As we increase the volume of key items and repeat shapes, through listening to her, we will drive revenue growth. Moving to Slide 8, our strategy has been consistent for two years and is what's driven the turnaround and profitability. Simply, the strategy is to focus on our high-value customer segment through elevating our product assortment while simplifying the business to drive down costs.
We've executed on our plans and have seen strong results in all the key metrics, with the momentum expected to continue in the product and customer pillars. I know we still have work to do, but we have a clear path of becoming cash flow positive. With three interest rate reductions and the highest consumer confidence seen in 3.5 years in Australia and New Zealand, we expect strong revenue growth through FY 2026 as we continue to deliver against our strategy. Moving on to Slide 9, in Australia and New Zealand, online revenue continues to be the largest and fastest recovery part of our business, at 52% of our sales. The personal revenue is the opportunity, and with 8.4% comps in FY 2025 we have strong momentum in our store base.
We're still delivering 22% of revenue from the USA, and due to our strategic cost-out actions, this is now profitable with a lower and variable cost base. We had a net increase of two stores in a year and opened six in the second half, with some low turnover stores closing in the first half, and we'll continue this discipline with underperforming stores as leases expire. Moving to Slide 10, retail has evolved. Every touch point needs to represent who the brand is and be clear to customers on what to expect. Product, team, and the store environment need to deliver on that brand promise. Stores need to be an experience, to be opened, refined, and easy to shop, with predictability in the lifestyles that are delivered to market. This page shows our new concept store in Wendell Park, and the customer response has been overwhelmingly positive.
The concept contemporizes our store experience and aligns City Chic with best-in-class retailers. We've secured four additional sites in the first half of FY 2026 in locations where we know we've traded very well historically. These include High point in Melbourne and Garden City in Mount Gravatt, Queensland. There is an opportunity for up to 120 stores in the Australia and New Zealand market. Moving to Slide 11, we've continued to receive positive reviews on our range improvements from our customers, and we're now getting this feedback regularly, and that's what's shown in the range sales for improvements. The most pleasing aspect is that as we learn more what she wants from us, the learnings compound and we increase the revenue. The quote that I think best outlines the strategy and how successful it's been is from an influencer, Chloe Vick. She's the middle one on the right.
You can read it. She said, "I'm wearing City Chic. They've had a massive rebrand and whoever the designer is, I'm obsessed." She's been on the journey with us and represents the shift in the perception of our brand through the execution of our product and customer strategies. Slide 12 shows the continued evolution in our product and the extensions in our lifestyle mix, with over 300 styles launched every month. We cover so many lifestyles and this is more cross-section of these. In store, we present a contemporary and feminine lifestyle with trend lingerie, denim with graphic tees, and our occasional dresses. What we've done with our new store environment, it really allows us to consistently have a home for these lifestyles all through the season, and then for her to be predictable and easy to shop and know where to go in the store.
Online gives our brand the opportunity to offer extended lifestyles to our customer. One example shown here is our wide fit kids' footwear category. We had done this historically, and it returned in the second half of FY 2025 and has been doing much better than we thought, which is really pleasing. We're implementing many other lifestyle additions. The majority of these we've had success with historically, and some new ones as we see important to our customer. We've refined our product mix in these lifestyles along with our strategy, and I know this is what will drive our continued online growth. Looking to Slide 13, we have delivered the $22.3 million cost-out and have reshaped the business. The entire team has done an amazing job, and I'm very grateful.
On the FY 2025 cost of doing business, there's a further $700,000 in savings based on annualizing the $2 million savings from FY 2025. As I said earlier, we're targeting another $1 million that we expect to achieve in full in FY 2026. As I've stated, we will consistently review and align our cost base to the revenue levels and take all required actions. I'll now throw to James to discuss the financials.
Thanks, Phil, and good morning, everyone. As Phil has already touched on, we're very pleased with the $14.8 million turnaround in our underlying EBITDA, driven by our stronger trading margin, improved fulfillment costs, and overall savings in our cost of doing business. In the first half, we were able to build on our margins, but the top line of sales slightly declined. In the second half, we have been able to continue with the stronger margins but also build good momentum in top line sales, lifting us to overall sales growth of 2.3%. The second half momentum was really driven by Australia and New Zealand, which grew 15.2%. In the USA, it is important to note that the revenue from the City Chic branded product grew 25% across our own website and partner business.
While overall revenue was down in the USA, this was materially impacted by the partner business, which was comping the sale of our branded product in the prior year. As we spoke about at the half year, we have looked to invest more in our marketing campaigns and to target higher value customers. We've seen pleasing results, particularly in ANZ, as we continue to transition from lower value discount customers to new high value customers. While the marketing spend has gone up compared to the prior year, it continues to remain in the high single digits as 1% of sales for the period. Our cost-out initiatives have seen savings across almost all cost categories and brought our total underlying cost of doing business down by $11 million, or 13% year- on- year. The most material savings were in wages, which were down 16.5%, saving us $5.7 million.
The savings are a combination of better roster management within our retail operations and also the outcome of the various business restructurings we've undertaken over the past 18 months. Turning to the balance sheet on Slide 16, you can see that the various corporate activities we undertook at the end of the last financial year have helped stabilize our balance sheet and put us in a position to start to grow again. We have reduced our drawn debt by $12.5 million, and our trade and other payables have returned to more normal levels after being higher in the prior year, driven by the various corporate activities. We have managed our inventory and cash flow balance tightly over the past year and continue to build on our strong processes and controls. We believe we're well positioned to execute on our strategic plans and drive growth.
I'll now hand back to Phil to talk through the outlook.
Okay, thanks, James. Our focus is to deliver profitable and sustainable long-term growth. We will achieve this through the continued execution of our product and customer strategies. In the first eight weeks of the financial year 2026, sales have exceeded our plans, which is very pleasing. This has been achieved with the continued improvement in our gross margin %, coming from further increases in our average selling price. Sales in Australia and New Zealand have continued the momentum from FY 2025 at around 8.7%, and this is expected to improve into FY 2026 as the strategic execution compounds. The product is resonating with our customers, and this consistent feedback gives me the confidence we will continue this momentum. The USA business continues to be profitable due to the variable cost base we established this year.
As communicated, due to political and economic uncertainty, we expect a reduction in the USA revenue in FY 2026 and accordingly reduced our inventory investment. In the first eight weeks, we delivered significantly less styles than we did last year, and with our wholesale partner Amazon decreased, with our website and marketplace partners holding the year, which includes Macy's, Nordstrom, and some others, which is a very pleasing result. With the variable cost base, the USA business is leveraged, and we can profitably withstand sales volatility and be ready for future revenue growth. Our focus is now on driving revenue growth, especially in Australia and New Zealand, and to achieve this, we're not relying on just being better. We have multiple building blocks that we know will get us there. The first block is the growing comparative store sales in Australia and New Zealand, as our strategic actions drive momentum.
Increased customer frequency will be driven through lifestyle and category improvements and new customers through focused advertising and re-engaging our lapsed customers. This will be achieved in an environment where consumer confidence is back at a 3.5 year high and three recent rate cuts. The second block is new stores. With six to eight expected in FY 2026, we already have four locked into the first half. We will also annualize the stores we open in the second half of FY 2025. The third block is something that's very exciting, and our customer has taken to it really, really well. We implemented our store-to-door program across our retail network. This allows our in-store customers, helped by our team, to purchase from our full assortment online directly through our point of sale.
Our store teams are incentivized to drive it, and they're offered to ship it to the customer for free. In only a few months, it has driven the equivalent of five stores' volume on a weekly basis, and that is truly incremental to our in-store sales and at no additional cost. I was in store, and I've seen two or three sales go through just this week, which is really exciting because as we make these process improvements and learn and then train the team further, we'll be able to continue this growth. The fourth block is our Australian partners. We launched on the Myer marketplace in August, and we expect this to drive similar sales, maybe a little bit more than our current ANZ partner The Iconic. On top of this, The Iconic will annualize its growth from last year.
Finally, we're launching on the Belt marketplace in the USA, and we've secured the partnership and are targeting a launch through the second quarter. As all these initiatives annualize, I know we can deliver compounding increases in revenue, and we'll identify further building blocks as we gain that momentum. It's really great to be back driving revenue opportunities. We'll execute on the further $1 million cost-out and annualize the additional $700,000 cost-out savings through FY 2025. With the support of our lender, we've stabilized our liquidity position with $8 million in cash and a $5 million undrawn on our facility that's in place till December 2026. The covenant is to make two clean downs on a yearly basis, and we made the first of these in July. With the revenue building blocks and cost-out initiatives, the business is on track to deliver a positive operating cash flow in FY 2026.
I'd like to thank the team for their work in driving this strategic turnaround. It's been so good to see the wins and to share the success of what we're doing together. Lastly, I'd like to thank the shareholders for their ongoing support, and thank you. 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 a question. Your first question comes from Owen Humphries with Canaccord. Please go ahead.
Thank you. Thanks, team. Looks like you guys are making some serious progress since FY 2026, so well done. Just looking at that outlook statement there, the first eight weeks up 9% for ANZ. Can you maybe just break that down between online and, I guess, offline?
Yeah, look, it's a little bit, they're both around that, Owen. Online is a little bit better, 1% or 2%, and stores are a little less. They're both within 1% of that. They're fairly consistent.
am just noticing the commentary around operating cash flow positive in FY 2026. Just to understand around the free cash flow, is the expectation you guys will return, given the cost savings, given the growth, given the margin benefits, that you will be kind of cash neutral through FY 2026?
I think the cost savings, we've delivered on that program now, and the focus is entirely on revenue and margin growth. We don't need to be taking significant steps forward to get to that positive cash flow, so that's 100% the aim.
Yeah, we expect to be operating cash flow positive.
Good one. And the last one here, just around the stores opening. Obviously, that's a growth strategy for you guys. Two net six new in the second half. Obviously, you're targeting six to eight new in FY 2026. What's the net number?
It'll probably be in that six to eight. That's why we put a range. Owen, I think there's one or two that are still underperforming that we'll look at. Obviously, there's not a lot of lease expiry in the next six months, so we'll just look at what the stores are doing and how they're going. We think it'll be around that six to eight net.
Good one. And then lastly from me, just into the peak period, how are you guys resourcing into that? That's obviously an important part for you guys in the next three months. As you guys have said, the U.S. inventory coming down, but is the inventory expected to, are you guys leveraging into it this year or still a bit more cautious?
No, no, we're planning to at least replace costs, maybe a little bit more in Australia, but we're going to make sure we have the fuel to be successful in this market. We've already seen much better results. I think, you know, I want to stay in the preso of 80% improved sale price, but as it's gone through April, May, and June, we've started to consistently achieve our targets of sell through, which is why we're much more confident to go and put it into more inventory and expect that. You're talking, you know, $1 million, less than $1 million if we do. We have all the forward orders to get us through now. We've bought it up till really December, January.
We're very confident we've put the right amount in, and we might be a little bit up in Australia, but it will be more than offset by the reduction in the U.S.
Good one, and good progress, guys. Well done.
Thanks, mate.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If there are no further questions, I will now hand it back to Mr. Ryan for closing remarks. Please go ahead.
Thank you, and thank you everyone for joining us. It's really great to have had such a big turnaround in EBITDA, but more importantly, as Owen just asked, we've seen the sell through of the product and getting back to our customer and finding what she's wanting from us and being able to deliver on that is exciting. I look forward to the next results and being cash flow positive at that time. Thank you, everyone, for joining us today.
That does conclude our conference for today. Thank you for participating. You may now disconnect.