I would now like to hand the conference over to Mr. Phil Ryan, Managing Director and CEO. Please go ahead.
Thank you, and good morning, everyone, and thanks for joining us. I'm Phil Ryan, the CEO and Managing Director of City Chic Collective, and I'm joined today by James Plummer, our CFO. This morning, I'll run through the presentation, starting with the business and strategic update. I'll then ask James to do a review of the half's financials, and I will then discuss the trading update before opening up to questions. Moving to slide two. Our EBITDA delivered an 86% improvement in the first half, increasing from a profit of $3.5 million to $6.5 million. This performance was underpinned by our strategic actions across customer and product, along with the disciplined execution of our cost out program. The ongoing growth is another positive step forward for City Chic.
Our simplified business model gives us a platform we can leverage to drive profitability as we look to return to stronger revenue growth and sustainable expanded gross margins. We'll achieve this through continuing to implement improvements in our fit and quality of product, to deliver on our Cut for Curves promise and focusing on our target high-value customers. As I said at the AGM, along with our strategy, we have comprehensively overhauled the product development process, including greater rigor across design and quality control. This initially resulted in a slower than planned intake of Australian and New Zealand summer product, which impacted revenue in the first half as we brought our factories on the journey with us.
Despite this deliberate shift, Australia and New Zealand still achieved a 10.1% increase in trading gross margin dollars, driven by a higher average sale price, which was up 6.1%. The performance of summer product in Australia shows the progress we have made in our assortment as we execute our strategy and deliver on the Cut for Curves promise. We realize there is still a long way to go, and we are evolving our assortment with the learnings we are taking from her. From this, we expect stronger sell-through in the Australian and New Zealand winters. The USA, with very limited inventory investment due to the tariff environment, as we've previously communicated, has performed above expectations and continued to deliver profit at a contribution level.
We are now investing in inventory for summer 2026, and given the performance of our summer range in Australia and New Zealand, we expect this to drive an improved performance. We delivered AUD 10.1 million in positive operating cash flow for the first half, reflecting disciplined working capital management. We've achieved the clean down covenants for FY 2026 and extended our facility until March 2028. In the first eight weeks of the third quarter, Australian and New Zealand trading gross margin dollars were up 17% on the prior corresponding period, driven by the continued strength in full price sell-through, improved product mix, and the sustained benefits of a tighter promotional discipline. Moving to slide five. Revenue was AUD 69.2 million, flat with the prior corresponding period, with Australia up 7.4%.
Our cash position is AUD 5.4 million, with an undrawn AUD 10 million bank facility. Our inventory reduced 21%, reflecting our decision to strategically pause purchases in the USA, given the tariff volatility. Our customer base is stable at 503,000, 58% of which are our target high-value customers. To drive revenue growth, our focus is on increasing annual spend through greater purchase frequency. This metric has shown improvement but remains well below our historical levels. She's remained a loyal CC customer, and when the economic environment is more positive, I know she will increase her spend with us.
In terms of the things we can control to drive our frequency, in Australia and New Zealand, we can achieve these improvements through new lifestyles, an increase in our CCX casual diffusion range with differential ranging and endless aisle in stores, and by expanding our new lifestyles and categories online. In the USA, we need to retain and build a customer base, which we are confident will come as we get our new product into the market. Moving to slide six. Our website traffic has grown. It's up 9%, and our Net Promoter Score has increased to 74. These results have come from the strategic communication improvements we've made across all of our touchpoints, from stores and websites to our socials and digital advertising. Most importantly, this comes from the positive feedback we've received on our product improvements as we deliver on our Cut for Curves promise.
Our trading gross margin was up 220 basis points to 62.2%, exceeding our target of 62%. We now need to leverage this as we drive volume growth. At a cost level, we've delivered all of our cost out programs and achieved a cost of doing business of 51%, down three percentage points from 54% in the prior corresponding period. Moving to slide nine. This shows the three strategic pillars that will drive EBITDA growth, and these haven't changed for some time. Putting her first, our customer, delivering on our Cut for Curves promise with our product, and continually looking at efficiencies to drive down costs in a simplified business. At a customer level, putting her first means making sure we build and protect the emotional connection that's kept the CC customer loyal over so many years.
She now has so many more options, especially online, than she's had historically. We need to talk to her in a way that ensures we maintain this connection. We do this through being more authentic in our social presence, making emails more personalized to her behavior, and continuing to listen through our monthly customer survey. It's actually quite unique to our brand that each month, over 3,000 of our customers give us feedback through the survey. It's invaluable in deepening our connection as we listen to her, and it really demonstrates how invested she is in City Chic. At a product level, our brand promise is to be Cut for Curves, always. We exist to solve her curve, fit, and fashion frustrations. Internally, this is more than a slogan; it's our reason for being. It informs every decision we make.
We need to understand her frustrations and deliver her solutions. We design with her curves in mind, and we fit with flex. From adjustable waists to fabric weight for structure and drape. Our designs are intentional, and we make her feel incredible. Driving efficiencies to ensure that our cost base aligns with revenue is embedded in our business. We understand that if revenue growth does not meet our expectations, we need to continually refine our operating model and deliver more cost out. Moving to slide nine. At 62% online and partners, our business is truly an omni-channel and is set for the digital future of retail. There are not many retail businesses in Australia with around 80 stores that deliver this online penetration. Moving to slide 10. We've achieved so much in the last two years.
We've right-sized the business and evolved our product mix, and we've targeted our high-value customer and achieved results in that. Our focus is now on driving revenue to deliver leverage on our cost base. With stronger gross margins, all revenue increases will deliver material profit growth. In Australia and New Zealand, there are some of the key actions. Firstly, we're increasing our CCX diffusion range, which is more casual in nature, to increase the lifestyle options for her at a more value price point, and we will still be maintaining our margins in this area. While our stores have always served a mix of customers, as we've elevated the range, those differences in customer preferences have become more pronounced. In response, we've moved to differential ranging. Historically, all stores carried largely the same assortment and relied on replenishment to adjust to sales volumes.
Now, with a broader online range, we have greater assortment depth and can tailor the initial allocation to better suit each store's customer. For example, some locations perform strongly in our occasion and high-end product, while others see stronger demand in casual and everyday wear. It really in the center, and we're evolving our business to follow that more. We've also listened to our customer and, for that matter, our team, and what they told us, that as they've seen the improvement in our assortment, we've created a Cut for Curves product that solves fit and fashion frustrations for ladies that are size 10 and 12. As such, in selected stores and online, we're currently trialing an increase in our size range to include a 10 and 12, with some good initial results.
This is capturing a new customer that we can help solve her frustrations and also catering to customers that are on a weight loss journey but still require that curvy fit. In our online business, we've seen a stronger customer response to expanded lifestyle and category assortments, such as footwear and sleepwear. We're continuing these expansions, and following a successful sleepwear trial in the first half, we're gonna roll out this category more broadly in the second half and beyond. In the USA, the primary driver of growth will be the reinvestment in inventory, which will start to flow in in March, really, and that's despite what we did in the first half with very limited purchasing. Sales have remained above our expectations, and the consumer has held up well, which really is very positive for the summer period in the USA.
If we look at the USA market, it has a materially greater addressable market than what Australia has. With the success we've seen of our digital high-value customer acquisition and reactivation strategies in Australia and New Zealand, we have a playbook to drive high-value customer acquisition in the USA through the fourth quarter and into FY 2027. Really, in America, we just need to take a small part of what is a very, very big market. To enhance our credibility in this market, we're talking to numerous partners about a pop-up physical presence or some way of, well, putting something down in the U.S. that shows we're, we're really committed to the market. Focusing on other markets such as Canada, U.K., and Mexico, we're implementing this international shipping, excuse me, through Global-e.
We've had a presence in these markets, and we can directly re-engage with some of our customers who are already familiar with the brand. Moving to slide 11. This slide shows a shows a really a little snip of our new range and some of the comments from our customer. Our Cut for Curves promise, as I said earlier, aims to deliver on fit and fashionability for our customer, and it's great to hear them saying in one of the quotes, "Keeping up with fashion and love the fits." Really, for me, that means we're delivering on this promise and is our platform for growth. Moving to slide 12. AI is changing the way business is done. Right now, companies are focused on how it can reduce costs.
We've been on that journey for a few years and have implemented numerous AI-led initiatives across the business that I'll talk through in a minute. Really, what's more exciting for us is how AI can help us optimize product decisions through leveraging data in our design and buying process. To achieve this, we've partnered with a cutting-edge Australian retail AI startup named SeeStone. Founded by a retail and digital commerce leader and a specialist AI and engineering team, the platform is purpose-built for fashion retail and integrates AI and predictive machine learning into our design, buy, and allocation process. What SeeStone enables us to do right now is to assess our new designs from a picture, sketch, or CAD, Computer-Aided Design, and provide the team with a probability of success.
It estimates the expected sales using all of our historic performance and broader market data, to give, to give us a probability of how we think that sell-through will be. It's an amazing tool and helps both planning and design teams make more effective decisions. It also enhances our ranging by store, region, and channel and supports the differential ranging strategy that I talked about earlier. What SeeStone has built for us is a machine learning platform with three years of our SKU and location-level sales data that is updated daily to consistently refine our learnings. It also reviews data from the internet on what other brands are selling as an indicator of our success. Further to this, and as a by-product, it will help us automate what is currently very manual, repetitive processes to improve scalability and free our teams to focus on higher-value decisions.
Some of the other areas we're achieving AI, more cost-enabled efficiencies, are, are below. We've used Jasper to create and optimize our marketing content. Jasper is a marketing-specific AI agent that over the last four years we've trained in the City Chic tone of voice and customer personas. What it gives us is brand-appropriate written content to all of our websites and all of our partners. On our websites, we use AI-driven product recommendations and on-site customer journeys that materially improve the customer experience. We're using our AI to optimize our digital marketing execution and driving improved return on advertising spend. To secure our digital networks, we're using AI to actively hunt cybersecurity threats through Sophos. These are just some of the examples of how AI is increasingly being embedded in our operations. I'll now throw to James to discuss the financial slides.
Thanks, Phil, and good morning, everyone. As Phil mentioned earlier, we're pleased with the continued improvements in profitability from the prior year. Underlying EBITDA of AUD 6.5 million represents an AUD 3 million improvement on the prior period, rewarding the disciplined execution of our strategy. While group sales were broadly in line with the prior period, the results reflect two very different regional performances and demonstrate a continued overall improvement in sales quality. In ANZ, revenue grew 7.4% on the prior corresponding period, with trading gross margin dollars up 10.1%. Our trading margin improved 1.3 percentage points on H1 2025 and 6.4 percentage points on H1 2024. This demonstrates the continued development of our product ranges, higher sell-through of full price product, and a more disciplined promotional approach.
In the USA, revenue was down 31% to $9.7 million. This largely corresponds to our deliberate reduction in purchasing, which was in response to the tariff-related volatility. The impact is most evident in the partner channel that relies heavily on new product launches. Even with the lower sales and fewer new products, the USA followed the group's disciplined promotional strategy, driving a gross margin increase of more than four percentage points compared to the prior period. This, along with our local variable cost base, is what allowed the U.S. business to still make a profitable contribution to the group, even with these lower sales. The overall cost of doing business fell by $2 million on the prior period, benefiting from last year's annualized cost savings, which have largely balanced out the inflationary pressures.
We continue to closely manage costs and take appropriate action to ensure the costs align with the trading results and the business can remain profitable. Turning to the balance sheet on slide 15, and this has been a real area of focus during the period. Pleasingly, we have generated AUD 10 million in operating cash flow for the half, reflecting our disciplined working capital management and improved operating efficiency. Inventory is down as planned, driven by the deliberate reduction in purchases in the USA. In ANZ, inventory remains in good shape, with the improved stock turns and a healthy mix of new and seasonably relevant product. Trade payables have moved in line with normal purchasing cycles, reflecting the timing of new inventory arrivals in ANZ ahead of Chinese New Year. This is consistent with normal trading patterns.
From a capital structure perspective, we fully repaid all drawn debt during the period and extended our debt facility through to March 31, 2028. All clean down covenants have already been met for FY 2026. While cash flow discipline remains a clear focus for the business, we're very pleased to have extended the debt facility under the same terms, which provides both stability and flexibility and positions us well to continue to execute our strategy. I will now hand back to Phil to talk through the trading update.
Okay, thank you, James. Moving to slide 17 in the trading update. In the first eight weeks, we've maintained our trading momentum. Australia and New Zealand gross margin trading was up 17%, and the revenue's up 9%, reflecting the continued strength in the full price sell-through and our improved product mix, and the sustained benefits of the target promotional discipline. Delivering continued year-on-year growth in Australia and New Zealand is another pleasing step forward. However, the performance continues to be impacted by economic pressures and softer consumer sentiment. This impacts demand as interest rates are rising. Recognizing these pressures, we are maintaining a disciplined focus on costs, inventory, and execution. In the USA, we've invested in product to relaunch into the summer season, as we've mentioned many times, and we know this will drive profitable growth in the 4th quarter and beyond.
The evolving developments regarding tariffs, as it currently stands, we estimate will result in a 5% reduction in duty for our goods entering into the USA from China. We're monitoring the situation closely. For now, it doesn't impact our current plans or timelines. We've strategically shifted Amazon from a wholesale partner to a marketplace relationship. This allows us more control over the range, price, and trading of the business. While this will cause short-term revenue challenge, it will deliver longer-term profitable growth that we can have greater control on. It is now all about leveraging our cost base to deliver profitable revenue growth. I'll now hand over for 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. The first question comes from Jasper Struwig with Canaccord. Please go ahead.
Morning, guys. Can you hear me all right?
Yep.
Congrats on the result. I know a lot of the numbers are pre-released, really, really good to see the operating momentum, especially in the trading update, and it's good to see, I guess, your, your core region and Americas really sort of starting to re-accelerate and grow. Could you potentially touch on how things are tracking over in the U.S.? I understand, you know, you guys are obviously reinvesting in the inventory over there, just keen to understand how things are tracking.
Yeah, look, Yeah, that-- Thanks, Jasper. Thanks for the question. Look, the USA is really a, a, a large focus of mine. I think for those of you that were around last year, you'll remember we were, prior to all the tariff stuff, we were really pinning our hopes on, on, on getting meaningful market share through there. What we decided was to really pause our strategy, and we didn't purchase anything into the second half of, w ell, the first half of the financial year, second half of calendar 2025, and the way she held up was way better than I expected. Even right now, she's doing a lot better than what, what we thought. We have delivered very minimal to basically no newness.
We see there's some coming into March as summer launches over there, and then really April, May, June, as we, as we get into the season. It's always been a much stronger season over there for us now, and we're, we're, we're confident that that will, that will continue. I mean, we still have around that sort of, ex cuse me. We still have almost 50,000 active customers over there, and it has been a lot more than that in the past, and we can reactivate and retarget that.
What we wanna do is use our playbook, on what we did in Australia over the last 12 months to take the learnings and implement them at a digital marketing and communications level to reengage and reactivate not only the customer we've got, but then to get more of the high-value target customers in what is a much more customer-rich environment.
That's perfect. Maybe just quickly touching on the shift in the Amazon operating model. You mentioned on the call that you're sort of expecting near-term revenue and your headwind. Can you maybe expand on that?
Sorry, can you say that again, Jasper? Can you say that again, please?
just, just a question on the shift in the Amazon operating model.
Amazon, yes.
Yes. Yeah, you just mentioned on the call that you're expecting some short-term revenue headwinds. Can you potentially sort of expand on that, what the expected headwind might be, how long it might last, that sort of thing?
Yeah.
Any thoughts?
Very good question. You can see in the first half, our partner revenue was the thing that took the biggest hit through the U.S. I think, yeah, I think it's all over 30% total drop in the market, the partner business had an even bigger drop than that, 32% on a constant currency basis. What we've done is Amazon used to order, you know, directly through our website and take it into their logistics on a wholesale level, it was very sporadic, and we couldn't understand what they were doing. We've since worked with a company to drive sales with Amazon, what we realized is we need to actually control what inventory they are getting in order to really drive it.
What it means is really through this first half, we haven't seen a lot of Amazon sales in quarter three so far, and we're expecting to ramp it up into quarter four in the U.S. The impact will be on the partners line in the U.S in the second half.
That's perfect. All the questions from me. Thanks, guys, and congrats again.
Thanks, Jasper.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. There are no further questions at this time. I will now hand it back to Mr. Ryan for closing remarks. Please go ahead.
Thank you, everyone, I'd like to extend a thanks to everyone for joining today. It's really pleasing to be continuing our Americas revenue growth. Getting double-digit margin growth in, in a challenging environment shows how much work we've put into product and how much the team here have done to make that happen and focus on our target high-value customer and execute on our strategy. I wanna thank the team. To be back in the USA and trading is exciting for us. We've had a business over there since 2010, and I know that once we get product into market, that we will be able to deliver on our Cut for Curves promise in what is a materially larger addressable market.
With our simplified business model now in place, really, as I've said a few times, it's all about focus on driving revenue to deliver that profitable growth. Thank you.