City Chic Collective (ASX:CCX) has confirmed a massive 30% slump in sales for the year ending June 30. This news strongly suggests why the struggling fashionwear retailer is attempting to raise new capital and selling off its US online Avenue business at a loss.

The company had its shares suspended from trading earlier this week until next Monday to allow it to raise approximately $27.5 million in an emergency funding round.

At the same time, the company announced it was looking at a loss of more than $9 million for the year. It has also received strong support from its financier, who has agreed to restructure its debt.

City Chic paid $US16.5 million (or $A24 million) for Avenue in 2019 and confirmed on Thursday that it had sold the business for $US12 million (or $A18 million), resulting in a significant loss.

"City Chic has signed a definitive agreement to divest its US-based Avenue business to Fullbeauty Brands for $US12 million (approximately $A18 million), subject to working capital adjustments at completion. The divestment aligns with the Group’s strategy of focusing on the core City Chic customer in ANZ and the US. Completion is scheduled for July 2024," the company stated.

City Chic also reported that its lender had agreed to restructure its current debt facility, providing a $10 million multi-currency facility with an extended maturity to December 2026.

City Chic confirmed that forecast Group sales for FY24 are down approximately 30% to $187 million (including Avenue).

The FY24 forecast Proforma Adjusted EBITDA post-AASB16 from Continuing Operations (excluding Avenue and Evans) is a loss of $9.3 million.

City Chic's shares were last trading at 30 cents before the suspension on Monday. They are unlikely to return to this level anytime soon if a highly dilutive capital issue occurs.