City Chic boss says it's a 'nightmare' trying to make future decisions

by · Australian Financial Review

City Chic Collective boss Phil Ryan says trying to make future decisions is a "nightmare" in the current climate but that the retailer's geographic mix and flexible supply chain puts its in good stead to weather the lingering COVID-19 storm.

As of Thursday afternoon Victoria reported 723 new virus cases and 13 more deaths. The spread forced further lockdowns in earlier July, and resulted in City Chic temporarily closing 20 stores (four regional stores remain open for now). NSW reported 18 new cases.

City Chic Collective chief executive Phil Ryan: "Online was very resilient for us in the last period." Janie Barrett

Mr Ryan told The Australian Financial Review while no one wants to lose sales, Victoria makes up a small part of the overall retail sales, which represents about 30 per cent of the group's total revenue in 2020.

"I don't want to downplay it, but unlike many Australian retailers, we are not behest to the physical store market in Australia – which is something we engineered over time – not to diversify against a pandemic, but that is how it's played out," he said.

"Online was very resilient for us in the last period. Our diversified geographies and channels gives me the confidence the business will be OK, even with [further restrictions]."

Mr Ryan said he is keeping all of the stock purchases reactive to what happens in the market, so the company does not get caught out with too much inventory if more widespread restrictions are implemented again.

"We are very lucky we have long-established supply partners. Every garment is having an 11-week touch base with the design team here," he said.

"Before we buy fabric in China, we are touching base to make sure we are still happy. If heaven forbid it goes the wrong way, we can then move very fast. It's all we can do. I can't not buy inventory. It's a nightmare but our model is different. We are not buying nine months out as many businesses are doing."

Tough predicament

It is a tough predicament for retailers as they get ready for the biggest shopping period of the year in December. Those who prepare for the worst and order less stock face missing out on sales if demand exceeds forecasts.

Daniel Agostinelli, chief executive of footwear retailer Accent Group, which owns The Athlete's Foot, Platypus, Hype and Trybe chains, recently echoed Mr Ryan's view.

"We tend to order four or five months out and all our orders need to be in store by late November [for Christmas], so we’ve been madly assessing what to do," Mr Agostinelli said.

Mr Ryan's comments came after the women's fashion chain – which operates its namesake brand as well as CCX and Fox and Royal – said sales for the 2020 fiscal year in Australia and New Zealand fell by 4.8 per cent to $113.7 million.

Revenue gained nearly 10 per cent in the first half, but tumbled over 21 per cent in the second half as its store network closed due to COVID-19 restrictions over two months. The retailer is also seeking to raise $90 million in equity as it aims to buy the online business of US-based Catherines out of bankruptcy.

Mr Ryan said he is not aware of any pending issues, such as underpayment of staff, despite flagging an external payroll audit and processes across City Chic's businesses on Friday.

"We are doing the audit as good governance, and we thought it wise to note this because if something did come up, and we raised money but said nothing, that was not the right thing do to for the market," he said.