US contributes around 20 per cent to City Chic Collective’s overall revenue, and more than 90 per cent of its product sourcing originates from China. The new measures significantly impact products manufactured outside the US, with Chinese imports facing particularly steep increases.
This forward-planning move ensures that City Chic has ample pre-tariff inventory to maintain uninterrupted operations through the second quarter of FY26. This cushion provides vital time to evaluate long-term sourcing and pricing strategies amidst ongoing trade uncertainties, City Chic said in a press release.
The group is actively working with its suppliers to manage the existing order pipeline and has, for the time being, paused all further stock entering the US market. Marketing spend has also been reduced to baseline requirements. Due to the tariff situation and its potential impact on consumer demand, US sales expectations have been reduced for FY26.
Pleasingly, with its predominantly variable cost structure, and a further $1.5 million in fixed cost reductions, it is anticipated that this approach will help enable the business to maintain a neutral contribution margin in the short term, while also unlocking a material portion of cash tied up in working capital through the sell-down of pre-tariff inventory.
The City Chic management team is monitoring all peer retailers in the US that source product from China, many of which are anticipating or already implementing price increases. While the group will continue to closely monitor market developments, in the current economic climate it does not believe that it will be feasible to raise prices sufficiently to entirely offset tariffs in the US without materially impacting demand.
Given the ongoing economic uncertainty and the fluid nature of tariff negotiations, it is currently not possible to reliably estimate the impact on US revenue for the remainder of FY25. However, if these conditions persist in the medium to long term, the group has begun discussions with suppliers to explore further mitigation strategies. Owing to recent business restructuring and a flexible cost base, it retains the ability to exit the US market at minimal cost should the tariff environment prove commercially unviable, added the release.
ALCHEMPro News Desk (SG)
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