NEW YORK — ChicTrend Corp. swung to a net loss of $99 million in the first quarter, a sharp reversal from the $15 million profit posted in the same period last year. The results, filed with the SEC, reflect deepening pressure on the fast-fashion retailer.
Revenue fell 12 percent year-over-year to $1.2 billion, missing the $1.35 billion consensus estimate. Gross margins collapsed to 28 percent from 35 percent in Q1 of the prior year.
The company booked $45 million in inventory write-downs on unsold seasonal merchandise—the largest quarterly inventory adjustment in ChicTrend's five-year public trading history.
CEO Lena Chen attributed the loss to shifting consumer preferences and rising input costs. "Our pricing strategies did not resonate with customers," Chen said during the earnings call. "We also faced elevated freight and labor expenses."
Goldman Sachs had projected a $20 million profit for the quarter. Following the report, the firm reiterated its Sell rating and cut its 12-month price target to $18 from $25. The stock closed Friday at $28.50, leaving roughly 37 percent downside to Goldman's target.
Operating expenses climbed 8 percent to $350 million, driven by marketing spend on new collection launches that failed to generate expected sales.
Management guided Q2 revenue of $1.0 billion to $1.1 billion and declined to provide profitability guidance for the period.
Rivals H&M and Zara have reported slowed growth but have not posted net losses, suggesting ChicTrend's inventory management problems are company-specific rather than purely sector-driven.
The company announced a 10 percent reduction in corporate headcount and a strategic review of underperforming store locations that could result in closures. Investors should watch whether those moves—and any improvement in gross margins—are enough to arrest the cash burn before the next earnings report, scheduled for Oct. 25.
