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Plus-size fashion retailer City Chic (ASX: CCX) has announced the sale of its UK brand Evans to AK Retail for £8 million ($15.5 million), alongside plans to exit the Europe, Middle East and Africa (EMEA) market which has deteriorated significantly for the Sydney-based company.
This compares to the £23.1 million ($41 million based on exchange rates at the time) that City Chic paid for the century-old Evans brand from Arcadia Group.
City Chic has reached a deal with its third-party provider to close its UK warehouse, and as a result it Navabi business will also cease trading. After costs associated with the closure, City Chic will pocket around £6.4 million ($12.4 million) from the sale.
The proceeds will be used for working capital and paying the group's remaining $1.5 million acquisition facility. The company's debt facility limit has been reduced to $20 million from $30 million, and will be cut by a further $5 million at the end of June 2024, reducing its funding costs.
As part of the agreement, AK Retail has acquired the Evans brand, intellectual property and customer base, although there will be a transition period whereby City Chic is entitled to sell its remaining Evans-branded product in the Australian, New Zealand and North American markets.
City Chic will also retain the right to trade under the City Chic, Avenue and other non-Evans brands in EMEA in the future.
"The focus of the strategic review has been on our online and international businesses to determine the most efficient way of returning to profitable growth," says City Chic chief executive officer and managing director Phil Ryan.
"We have seen a significant deterioration in the EMEA market over the past two years which has hampered our ability to sell our expanded product range, compounded by global supply chain constraints.
"We are continuing with the rationalisation of our product offering, streamlining our supply chain and focusing on cost management. I am confident that we can return to a more agile operation that quickly responds to her changing needs and puts us in a much stronger position for when market conditions improve."
It is expected that the EMEA business will be treated as a discontinued operation in FY23, and that assets held for sale at the end of FY23 will incur an impairment of between $29 million and $31 million, including closure and transaction costs.
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