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Mosaic Brands Ups Digital Offering, May Close Up to 500 Stores
Mosaic Brands has recorded an underlying loss for its full-year 2020 results, citing the early-year bushfires and COVID19 pandemic as core factors for the loss.
The results of this is an underlying loss before EBITDA1 of $45.8 million for the full year. The result is before $113.5 million of non-cash impairment related to brand names, and the right of use assets.
“Today’s result does not reflect the consistent growth the Group has achieved over the past four years, nor does it reflect our circa 6,000 strong team’s hard work and commitment during FY20,” said Scott Evans, the Managing Director and CEO of Mosaic Brands.
“The first third of the financial year saw the business perform solidly. The acquisition of the ex-SFG brands delivered comparable store sales and margin growth, and we were forecasting EBITDA of $75m for FY20.
“That forecast was utterly derailed, first by the devastating bushfires which directly impacted 20 percent of our store portfolio over the Christmas period, then by COVID-19 which saw us close all 1,333 stores for nine and a half weeks including the peak Mothers’ Day trading period,” he said.
Mosaic Group is continuing to invest in its e-commerce offering, with a 40 percent growth in the second half of the FY. In the first half of the financial year, Mosaic Group experienced growth of 35.9 percent, with overall digital sales for FY20 growing $93.7 million, representing 14.7 percent growth YoY.
Mosaic Group houses brands including Rivers, Millers, Noni B and Autograph.
“There is no roadmap to navigate these circumstances, but our operational priorities have been ensuring team and customer safety, reducing inventory and maintaining a strong cash position. This has allowed us to reshape Mosaic to take advantage of the fundamental changes happening in retail,” Evans explained.
Sales for H2 accelerated by over 35.9 percent against the prior year and have continued into FY21, with July delivering 40 percent growth across the nine digital department stores. The Group closed June with over 150,000 SKUs’ available online, spanning 14 categories.
While digital remains a strong contender for the Group, there’s an expectation that 300-500 brick-and-mortar stores will be reduced. This depends on the final lease negotiations, the Group reported.
The closure of stores across a nine and a half week period occurred during ‘peak trading periods’, the Group found.
“The retail rental market in Australia is not paused because of the pandemic – it is fundamentally changed for the future,” said Evans.
“Some though not all landlords accept that reality, so while exact locations and numbers are to be determined, the Group anticipates potentially 300-500 store closures over the coming 12-24 months. Shuttered stores work for no one so we aim to minimise closures, but not on uncommercial terms.”
Despite the closure of stores and loss in EBITDA, the Group remains ‘well-positioned’ to return to sustainable profitability in FY21.
“Many of our customers and team members are in the most vulnerable segment that COVID-19 attacks. Keeping hundreds of stores open longer in a key trading period would have been fiscally sound but completely against our commitment to putting our team and customers first,” said Richard Facioni, the Chairman of Mosaic Brands.
“We strongly believe that in the longer term this demographic will play a key role in retail as the majority are not of the JobKeeper generation and are more likely to return to spending as and when the virus recedes.
“The Board and I also recognise the ongoing commitment of our 6,000 Mosaic team members throughout what has been an unprecedented 12 month period and acknowledge the impact potential store closures will have on them in tough economic times,” Facioni explained.