Renewed online focus proves profitable for Mosaic, sees 50% NPAT growth in H1 FY24

Even as discretionary spending takes a hit, fashion retail company Mosaic Brands (ASX: MOZ) has come out strong, ending the first half of FY24 with a 50% increase in its Net Profit After Tax (NPAT) on PCP. As per its recently released unaudited trading update, the Company expects to report an approximate NPAT of $5.9 million.

This achievement comes despite an estimated negative impact of $4.3 million due to adverse currency movements against the USD. Adjusting for this impact, the Earnings Before Interest and Tax (EBIT) stands at approximately $14.9 million, up from $11.95 million in PCP. 

Stock intake for the half was around $41 million below the prior year, in line with the Group’s balance sheet improvement strategy, delivering an $11.6 million improvement in net current assets and securing further projected balance sheet improvements in the second half. 

CEO Scott Evans said, “Having returned the Group to post-COVID profit in FY23, as set out at the AGM in November, our priority is on improving our balance sheet in FY24 as the final step of our turnaround. That saw us take a front foot approach on stock management for the first half and negotiating an improved cost price for goods looking to the next 12 months. Against a backdrop of reducing our stock purchases by 33% for the first half, achieving an in-store decline of just 6.6% highlighted that our customers are reacting to our new ranges exceptionally well.” 

Mosaic Brands, the owner and operator of nine retail clothing brands predominantly in women’s apparel and accessories across Australia and New Zealand, operates a network of approximately 763 stores and online digital department platforms.

During the second quarter of FY24, the Company reported cash flow positivity, with an impressive inflow of $43.4 million. It ended the quarter with $24.6 million in cash.

In Q1 FY24, Mosaic faced expected interim disruptions to its online operations as it transitioned to a new Salesforce platform. Despite this, online sales exhibited positive growth trajectories and improved conversion rates towards the end of the first quarter. It also opened 30 new stores to maximise profits from the Christmas and Black Friday sales.

During Q2, Mosaic made rental payments of $91,000, Board Fees of $15,000 and a Guarantee fee of $101,000. Rental costs paid were at normal commercial terms and conditions.

Evans added, “We’ll now lift stock intake from March for the second half on the back of some of the most favourable inventory costs the Group has achieved in its history.”

Recent negotiations have enabled the group to secure highly favourable cost prices for its products, setting the stage for continued earnings growth and balance sheet improvement in the second half of FY24. Mosaic Brands enters the second half confident of continued balance sheet improvement, combined with expected sales and profitability growth.