City Chic’s sales run-rate stepped down materially in 2H23e with sales for the half likely to be $128-$132 million, down 29% on the pcp. Elevated discounting is the primary driver. The quality of inventory does also worry us. The company’s guidance that gross margins are down 18 percentage points, suggests that almost two-thirds of its sales drop is a function of lower realised prices. We expect weak sales to continue in 1H24e as discounting continues. Sales should recover in 2H24e onwards. However, the sales base is likely to settle around $316 million in FY25e, far below aspirations of $400 million only six months ago