Meet the ASX retailer that rocketed to a 12-year high today

share price rocket

Trading conditions might be tough for the retail sector on the whole, but this hasn’t stopped the City Chic Collective Ltd (ASX: CCX) share price from surging to its highest level since 2007.

The CCX share price jumped 11.1% to $2.00 on Tuesday while the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index added 0.5%.

Consumer facing stocks were back in favour as risk appetite improved on hopes that US and China will return to the negotiating table to deescalate the trade war with the Harvey Norman Holdings Limited (ASX: HVN) share price, Wesfarmers Ltd (ASX: WES) share price and Premier Investments Limited (ASX: PMV) share price outperformed the broader market.

Big profit growth in a niche market

But its City Chic that’s stealing the spotlight as it showed that niche retailers are do very well even in the face of digital disruption.

The plus-sized women apparel group reported a 25% increase in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to $24.9 million as sales revenue improved 12.6% to $148.4 million.

More encouragingly, comparable sales growth (revenue growth from stores opened by a year or more) jumped 12.2%. That’s enough to make most retailers green with envy as even well-run retailers that have posted profit growth have not been able to deliver increases in this key measure.

Margin expansion

Further, the results imply that the group has managed to lift EBITDA margins at a time when most companies are being squeezed by rising costs and the weakening Australian dollar.

City Chic attributed this to its growing online sales channel, which generates bigger margins and now accounts for 44% of global sales.

“The growth in our online business is encouraging as we gained a greater share of wallet and expanded our offering, which is now three times our in-store range,” said City Chic’s chief executive Phil Ryan.

“FY19 was a strong year for our northern hemisphere business, which contributed20% of global sales.”

Positive outlook

The group also declared its first final dividend since 2014 that’s worth 1.5 cents a share. This brings its full year payment to 4 cents a share, or 6.5 cents a share if you included the special dividend it paid earlier this year.

There could be more good news to come. Management said that comparable sales growth has been positive since the start of the current financial year and it believes this will continue through FY20.

Group sales this year are also likely to benefit from more store rollouts, expansion into related categories and its efforts to grow its US customer base.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with him on Twitter @brenlau.

The Motley Fool Australia owns shares of and has recommended Premier Investments Limited and Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.