Battling to keep the doors open at its flagship Noni B, Katies, Millers and Rivers stores, specialty fashion retail Mosaic Brands (ASX: MOZ) will shutter five of its brands in a drastic move to simplify its business and secure its financial future.
All retail and online stores associated with Rockmans, Autograph, Crossroads, W.Lane, and BeMe will be shut down, in a bid to consolidate their operating expenses and deploy them to its core brands which will be supported by a new online marketplace.
Struggling in a Challenging Economic Environment
The decision comes after Mosaic faced prolonged financial difficulties, exacerbated by the COVID-19 pandemic and ongoing economic pressures, including high inflation and a decline in discretionary spending. Australia’s inflationary landscape has significantly impacted consumer habits, with many households cutting back on non-essential purchases. For clothing retailers this has seen spending diverted to low-cost brands rather than premium labels.
This has posed a challenge for retailers, particularly those like Mosaic Brands, which rely heavily on middle-market consumers.
The retail giant had already shown signs of distress before the pandemic, but the global health crisis delivered a further blow, forcing the company to temporarily close stores and pivot towards eCommerce. Despite these efforts, Mosaic has struggled to recover in the face of changing consumer behaviour and a more competitive retail landscape.
“Whilst the operational details of the rationalisation plan, including store closures, continue to be worked through, we will seek to minimise the impact on our team, including where possible reassigning impacted team members into roles within the five core brands,” said Mosaic CEO, Erica Berchtold.
“Our Focus on Core is a growth-driven strategy to retain existing customers and attract new ones. Central to this strategy, Mosaic will continue to focus on servicing regional Australia,”
Focus on Core Strategy
Mosaic’s new strategy, dubbed “Focus on Core,” revolves around strengthening the Millers, Noni B, Rivers, and Katies brands—four of the company’s longest-running and most successful labels. These core brands, which have historically appealed to an older demographic, will now form the foundation of the Group’s growth plans.
“Each of those core brands will have a clearly differentiated market proposition, target customer, price point, and product range,” added Berchtold.
A significant part of this new strategy will also include launching a standalone online marketplace. While details about this marketplace are yet to be fully revealed, the Company hopes it will become a central digital hub for its core brands, giving customers an enhanced shopping experience and access to a wide array of products from Millers, Noni B, Rivers, and Katies.
Store and Website Closures
As Mosaic prepares to wind down Rockmans, Autograph, Crossroads, W.Lane, and BeMe, all stores and corresponding online platforms for these brands will be closed. The Group has not provided an exact timeline for the closures, with operational details still being worked out in consultation with various stakeholders.
The Company is working closely with partners and has assured its senior lender’s support. Shareholders, however, have had their funds tied up due to MOZ shares entering voluntary suspension on 30 August 2024 when the Company confirmed it was not in a position to publish its financial statements for FY24 – a regulatory obligation.
MOZ shares consequently closed at 3.6 cents that day, plummeting 21% on the previous close.
While the brand and store closures will undoubtedly impact employees, Mosaic has committed to minimising job losses where possible. Berchtold emphasised that the Company would seek to reassign affected employees to positions within the remaining core brands.
“We will seek to minimise the impact on our team, including where possible, reassigning impacted team members into roles within the five core brands,” she added.
Long Road to Financial Recovery
Despite these setbacks, Mosaic is optimistic that its Focus on Core strategy will pave the way for a stronger, leaner Company. The restructuring plan aims to not only stabilise the business but also drive long-term growth, particularly in regional Australia, where many of the Group’s brands maintain a loyal customer base.
Mosaic Brands has yet to provide further detail on the scale of store closures or the specific investments planned for its core brands, but it is expected to release additional information in the coming weeks. The Company has not set a date for its FY24 financial statements to be released, which they claim “has taken longer than anticipated,” but MOZ shares are expected to resume trading upon the release of those statements and updated details of their debt situations.
In their previous set of audited financial statements for the Half Year ended 31 December 2023, Mosaic Brands reported $254 million of revenue which was a 10% decrease on the previous corresponding Half Year, with $5.4 million in net profit after tax, a 121% increase.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, bloodstock enthusiast and former Analyst.
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