WOOD Flash - CCC: key takeaways from the recent site visit

Last week (10-12 April) we attended a site visit at CCC’s HQ, which presented new collections and discussed new agreements with suppliers, including exclusive licences. After a long struggle with excess and outdated inventories, over 90% of its stock now comes from fresh collections. Moreover, new supply agreements, including licences with Reebok, Hunter, Nine West, Kappa and Mexx, and renegotiated deals with the remaining suppliers, coupled with the “circle” mechanism of co-financing the sell-downs with the brand owners, should allow CCC to widen its gross margin further. According to the company, the FY24E gross margin should exceed 60% for the CCC banner and exceed 50% at Half Price, with a recovery at Modivo Group expected at a later stage. The new refinancing deal should also let the company see easier cash management, allowing it to prioritise margins overs short-term liquidity. Overall, we find CCC’s message very strong and expect a positive market reaction. Given the company’s soft track record in delivering ambitious plans, however, we believe the market may need couple of quarters to gain confidence in such a tectonic change in fundamentals.