With Covid, many companies lost the very feature that set them apart (and that they invested significantly in). For experiential companies, customers being inside their stores was a necessity. So, while some successfully transitioned to eCommerce, others waited for business as usual to return.
Retail company Mosaic (ASX: MOZ) was one such company. After acquiring EziBuy, its eCommerce subsidiary in 2022 to deal with pandemic-related footfall restrictions, it is finally seeing people waltz back into its stores. In FY23, the Company expects its EBITDA to be $17 million, representing a $33 million turnaround to FY22’s EBITDA loss of $16 million. The Company achieved this in a challenging environment, as it faced higher costs of purchasing goods, increased logistics expenses, and the impact of an unfavourable US dollar exchange rate.
Store-only comparable sales concluded the year with a 9.6% increase compared to FY22, but online sales decreased by 6%, primarily due to declines in third-party vendor sales. Online sales constituted approximately 20% of the total turnover. Mosaic anticipates reporting total sales of approximately $519 million in its upcoming full-year audited report, representing a 6.2% increase over FY22.
Mosaic owns and operates nine retail clothing brands, predominately within women’s apparel and accessories within Australia and New Zealand, sold through its network of 804 stores and its online digital department platforms.
The Company realised that EziBuy’s performance, which it bought for $11 million in 2022, has been different from the strong and steady digital growth seen in Mosaic’s other brands. Online sales for the Group, excluding EziBuy, now make up 23% of the revenue and have surged by 68% compared to pre-pandemic levels. EziBuy, acquired as part of Mosaic’s online strategy shortly before the pandemic, proved profitable in FY21 and FY22 despite having no physical stores in Australia.
But, like many online brands, EziBuy faced challenges as the pandemic lockdowns eased and in-store shopping resumed. As a result, total sales in the first half of FY23 declined by 51% compared to the same period in the previous year.
After conducting a thorough review of the situation, the Board decided that it would be in the Group’s best interest to restructure the EziBuy business. Consequently, EziBuy appointed administrators.
In FY22, the Company faced considerable losses amounting to over $11.4 million, marking a substantial 522% increase compared to FY21. Additionally, Mosaic’s revenue declined by 12.6%, reaching approximately $619.5k. It saw some relief in FY23.
In H1 FY23, store-only comparable sales experienced significant growth, rising by 11.9% on H1 FY22. In the second half, the sales growth was still positive but moderated to 7.6% due to the impact of Reserve Bank measures implemented to manage inflation.
During Q4 FY23, the Company saw an improvement in operating cash inflows, totaling around $11.9 million, which was a positive shift from the operating cash outflows of $17.6 million in the previous quarter.
As it emerges from the embers of its declining share price throughout the pandemic, Mosaic is reviewing its strategy going forward. To tap into the in-store shopping boom (and the online shopping decline), Mosaic plans on opening up to 130 new stores in the next six months.
Alinda is a Business Reporter for The Sentiment
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