City Chic (ASX:CCX)
climbed the ASX leaderboard as the third best performing stock after several broker upgrades, following its trading update yesterday.
The plus size clothing giant posted a 25.4 per cent jump in sales in the first 17 weeks of the second half ending 24 April, however its net debt is expected to be in the range of $6 million to $12 million when compared to the prior period where no debt was drawn.
City Chic Collective is on track for strong sales growth and further improvement in earnings with second half EBITDA expected to surpass the first half, conditional on consumer demand in May and June.
Morgan Stanley believes the company is executing well given the tough environment. With the stellar sales growth, guidance has been maintained in the second half to date, however it’s tracking below consensus of 32.9 percent.
The broker expects attention will start to shift to financial year 2023 earnings where the risk profile has widened and notes that the risk versus reward continues to look attractive. Morgan Stanley has retained its overweight rating on City Chic and target price of $5.
Meanwhile, Ord Minnett expects future growth to be driven by store rollout initiatives locally, combined with increased sales in the US while its recent acquisition of Evans and Navabi are set to bode well for European growth.
Shares in City Chic soared 9.5 per cent at $3.