Australian retailer City Chic Collective Limited has taken swift action to address the recent U.S. government announcement of sharp tariff increases on global imports. To mitigate the impact, the company has expedited the shipment of its Summer 2025 collection and a substantial portion of its Winter 2026 range to the U.S., ensuring pre-tariff inventory levels remain sufficient to support uninterrupted operations through the second quarter of FY26.
With the U.S. contributing approximately 20% of City Chic’s overall revenue and more than 90% of its products sourced from China, the retailer is significantly affected by the tariffs, which impose particularly steep increases on goods imported from China. The company stated in a press release that this proactive measure offers valuable time to reassess its sourcing and pricing strategies amid ongoing trade uncertainties.
In response to the changing landscape, City Chic is collaborating closely with its suppliers to manage current orders. It has also temporarily paused additional stock shipments to the U.S. while reducing marketing expenses to essential levels. Anticipating the potential effects of increased tariffs on consumer demand, the retailer has revised its U.S. sales expectations for FY26.
Despite these challenges, City Chic’s flexible cost structure, alongside recent business restructuring, positions the company to navigate this uncertainty effectively. A further $1.5 million in fixed cost reductions, combined with efforts to sell pre-tariff inventory, is expected to maintain a neutral contribution margin in the short term. This strategy also aims to free up a significant portion of cash tied up in working capital.
The company is closely monitoring its U.S.-based competitors that also source products from China, many of which are preparing for or already implementing price hikes. However, City Chic acknowledges that raising prices to fully offset the tariffs may not be feasible in the current economic environment without significantly reducing consumer demand.
Due to the ongoing unpredictability of economic conditions and tariff negotiations, City Chic cannot reliably forecast the full impact on U.S. revenue for the remainder of FY25. Nevertheless, the company is actively exploring additional mitigation strategies with its suppliers to adapt to the evolving market landscape.
In the event that the tariff environment proves commercially unsustainable in the medium to long term, City Chic’s management team has indicated its readiness to make difficult decisions, including the possibility of exiting the U.S. market. Thanks to its recent restructuring and predominantly variable cost structure, the company retains the flexibility to scale back its U.S. operations with minimal financial impact if necessary.
City Chic Collective’s strategic response to the tariff challenges underscores its commitment to agility and resilience in an uncertain trading environment. While the future remains fluid, the company is taking calculated steps to safeguard its position and sustain its operations in the face of mounting global trade pressures.
