City Chic Collective Limited

Thank you for standing by and welcome to the City Chic Collective Limited HY2026 results. All participants are in 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.

Thank you, and good morning, everyone, and thanks for joining us. I'm Phil Ryan, the CEO and Managing Director of Citizenship 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 house 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 Cityship. Our simplified business model gives us a platform we can leverage to drive profitability as we look to return to stronger revenue growth at sustainable expanded gross margins. We'll achieve this through continuing to implement improvements in our fit and quality of product to deliver on our tap for curves promise and focusing on our target high value customers. As I said at the AGM, aligned 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 Australia 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 high average sell 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-up-for-curves promise. We realise there is still a long way to go and we are evolving our assortment with the learnings we are taking from her. And from this, we expect stronger sell-through in the Australian New Zealand winter. The USA, with very limited inventory investment due to the tariff environment, as we've previously communicated, has performed above expectations and continues to deliver profit at a contribution level. We are now investing in inventory for summer 26, and given the performance of our summer range in Australia and New Zealand, we expect this to drive an improved performance. We delivered $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 FY26 and extended our facility until March 2028. In the first eight weeks of the third quarter, Australian 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 $69.2 million, flat with the prior corresponding period, with Australia up 7.4%. Our cash position is $5.4 million, with an overall $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 things we can control to drive our frequency, in Australia and New Zealand, we can achieve the 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 social and digital advertising. But 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 eight. 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 continuing with the 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, which she's had historically, and 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 personalised to her behaviour, 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 Cityship. At a private level, our brand promise is to be cut for curves, always. And 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 9. At 62% online and partners, our business is truly an omnichannel 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-sided 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 valued 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 the 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 is a 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 demand for 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 trialling 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 that 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 swim. We're continuing these expansions and following a successful sleepwear trial in the first half, we're going to 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 FY27. 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 US that shows that we're really committed to the market. And then focusing on other markets such as Canada, the UK and Mexico, we're implementing international shipping, excuse me, through globally. 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 really a little snip of our new range and some of the comments from our customer. Our cut for courage 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 to in a minute. But really, what's more exciting for us is how AI can help us optimise product decisions through leveraging data in our design and buying process. To achieve this, we've partnered with a cutting-edge Australian retail AI start-up, Mage Seastone. 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 Seastone 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 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's Seastone have 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 where achieving AI more cost enabled efficiencies 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 citizenship tone of voice in 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 optimise our digital marketing execution and drive an improved return on advertising spend. And to secure our digital networks, we're using AI to actively hunt cyber security 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 $6.5 million represents a $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 cross-funding period, with trading gross margin dollars up 10.1%. Our trading margin improved 1.3 percentage points on half-year 25 and 6.4 percentage points on half-year 24. 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 US 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 $10 million in operating cash flow for the half, reflecting our disciplined working capital management and improved operating efficiency. Inventory is 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 31 March 2028. All cleaned-out governance have already been met for FY26. 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 us 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 of the trading update. In the first eight weeks, we've maintained our trading momentum. Australia and New Zealand gross margin trading is up 17% and the revenue is up 9%, reflecting the continued strength in the full price sell-through and our improved product mix, and the sustained benefits of the private 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. Recognising 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 fourth 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, and 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 1 on your telephone and read for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. The first question comes from Jasper Sterwick with Canaccord. Please go ahead.

Good morning, guys. Can you hear me all right? Yep. Congrats on the results. I know a lot of the numbers are pre-released, but really good to see the operating momentum, especially in the trading update, and it's good to see, I guess, your core region and ANZ really sort of starting to reaccelerate and grow. But could you potentially touch on how things are tracking over in the U.S.? I understand, you know, you guys are obviously reinvesting in inventory over there, but just keen to understand how things are tracking.

Yeah, look, absolutely. Yeah, thanks Jasper. Thanks for the question. Look, the USA is really 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 getting meaningful market share through there and what we decided was to really pause our strategy. And we didn't purchase anything into the second half, well, the first half of the financial year, second half of calendar 25. And the way she held up was way better than I expected. Even right now, she's doing a lot better than 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 get into the season. It's always been a much stronger season over there for us now and we're confident that that will continue. I mean, we still have around that sort of, excuse 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. And what we want to 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 re-engage 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.

Perfect. And then 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, I guess, headwinds. Can you maybe expand on that?

Sorry, can you say that again, Jasper? Can you say that again, please?

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 please sort of expand on that, what you expect the headwind might be, how long it might last, that sort of thing? Just keep that in your thoughts.

Very good question. You can see in the first half our partner revenue was the thing that took the biggest hit through the US. I think it's over 30% total drop in the market and 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 directly through our website and take it into their website Logistics on a wholesale level and it was very sporadic and we couldn't understand what they were doing. We've since worked with a company that drives sales with Amazon and what we realised 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 US. The impact will be on the partners line. in the U.S. in the second half.

That's perfect. All the questions for me. Thanks, guys, and congrats again. Thanks, Jocelyn.

Once again, if you wish to ask a question, please press star 1 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, and I'd like to extend a thanks for everyone for joining today. It's really pleasing to be continuing IMZ revenue growth. Getting double-digit margin growth 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, and I want to thank the team. and to be back in the USA in 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 curse 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.

That does conclude our conference call for today. Thank you for participating and you may now disconnect.