City Chic flags US exit option amid tariff upheaval
City Chic says it has the option to pull the plug on its US stores if talks between the Trump administration and Beijing fail to resolve a standoff that has slapped a 145 per tariff on Chinese imports.
The plus-size women's fashion retailer told investors on Monday that sales in the second half of the financial year would come in at the lower end of guidance, even after it raced to bring new season stock into the US before it was hit by Donald Trump's massive impost.
The group generates 20 per cent of revenue from the US and 90 per cent of its products are made in China.
City Chic said it had moved to soften the blow by bringing the bulk of its summer 2025 range and a substantial portion of its winter 2026 apparel into the US ahead of the changes, which it said should keep its store stocked until the second quarter of the new financial year.
But all further imports from China have now been paused while it works with suppliers on existing orders. It has also slashed its US marketing spend.
Leaders in Beijing are still mulling the possibility of trade talks between the world's two biggest economies after the US broke the stalemate with an approach to do a deal late last week.
'Given the economic uncertainty and fluidity of potential tariff negotiations, it is not yet possible to provide a reliable estimate of the impact on the revenue of the USA business for the remainder of FY25,' City Chic said.
'Should these conditions continue over the medium to long term, the group has commenced discussions with its suppliers to further mitigate the impact of the increased tariffs.
'Due to restructuring of the business and the variable nature of the cost base, the group has the option to exit the USA with minimal cost if the tariff situation remains uncommercial.'
City Chic said US sales in the first 18 weeks of the second half were down 13 per cent compared to a year earlier, noting 'trade and consumer sentiment was already volatile' before Mr Trump imposed savage tax increases on his country's trading partners on April 2.
Troubles in the US were in stark contrast to the performance of its store in Australia and New Zealand, which increased sales during the period by 17 per cent.
But the company conceded sales growth had been lower than expected, despite strong customer numbers, growing online demand and improving consumer sentiment after the Reserve Bank's February interest rate cut and expectations of more to come this year.
City Chic said efforts to reduce group costs by $2 million were on track and there was a further $1.5m to be trimmed from US operations.
But it said already downgraded revenue guidance for the second half of between $137m and $147m would now come in at the lower end of the range.
'While management will use the low end of this range as its target for the remainder of the financial year, the current volatility and uncertainty puts this result at risk and results could fall short of this target,' it said.
'The management team remains firmly focused on executing its strategy, driving sales, protecting margins, and delivering the planned cost reduction program to position the business for long-term success.'
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