Retail in Australia has changed forever as a result of COVID-19 with Mosaic Brands (ASX: MOZ) the first large ASX-listed fashion retailer to announce mass closures of their retail network where up to 500 clothing stores will close permanently over the next two years.
The announcement to reduce their network of more than 1,333 stores, which include popular brands Noni B, Katies, Millers, Rockmans, Rivers and others, comes alongside a $212.1 million statutory loss before tax by Mosaic, primarily due to trading conditions through the pandemic. This included a $113.5m write down of non-cash impairments related to brand names, goodwill and right of use assets
“The first third of the financial year saw the business perform solidly,” said Mosaic Brands CEO, Scott Evans.
“That forecast was utterly derailed, first by the devastating bushfires which directly impacted 20% of our store portfolio over the Christmas period, then by COVID-19 which saw us close all 1,333 stores for 9 ½ weeks including the peak Mothers’ Day trading period.”
“The retail rental market in Australia is not paused because of the pandemic – it is fundamentally changed for the future.”
“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.”
As a rare shining light within Mosaic’s FY20 financials, online sales increased by 14.6% to deliver $93.7m sales revenue which will ease the transition towards store closures where customers are already adept to buying online.
With 87% of the Mosaic store network’s leases set to expire over the next two years, the Company will be highly selective in which stores are renewed but has forewarned that 300-500 will close permanently. Through this period, it is expected that tenants and landlords will find middle ground however most retailers have significantly upgraded their digital channels through the pandemic due to Government-enforced store closures.
Mosaic’s preparation to permanently shut up to 500 stores comes a week after 129 of their stores were closed by landlords Scentre Group (ASX: SCG) which operate Westfield Shopping Centres. That came after months of rental underpayment and breakdown in negotiations.
“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 Mosaic Brands Chairman, Richard Facioni.
“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.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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