‘Utterly derailed’: 500 stores to close
Australia's retail apocalypse has potentially claimed a fresh scalp following the shock announcement Mosaic Brands could shut up to 500 stores within two years.
The retail juggernaut - which owns a slew of popular fashion chains including Rivers, Millers, Katies, Noni B and Crossroads - released its results for the full year ended June 28, reporting a staggering $45.8 million loss.
That dismal result came down to the double whammy of the devastating bushfires followed by the coronavirus pandemic which shut down stores for almost 10 weeks.
But while the company enjoyed "strong and accelerating online digital department store sales of $93.7 million for the year" it also unveiled a drastic store reduction program which could see 300 to 500 stores vanish over the coming 12 to 24 months, depending on final lease negotiations.
Mosaic Brands' managing director and CEO Scott Evans said the group had been progressively reducing its exposure to long lease terms over the past three years, with around 41 per cent of current leases either on holdover or due to expire by December.
He said around 87 per cent of its 1333 stores were due to expire over the next two years.
"The retail rental market in Australia is not paused because of the pandemic - it is fundamentally changed for the future," he said.
"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."
However, Mr Evans noted the results did not reflect the "consistent growth the group has achieved over the past four years".
"The first third of the financial year saw the business perform solidly," he said, adding that the acquisition of former SFG brands had led to an earnings before interest, taxes, depreciation and amortisation (EBITDA) forecast of $75 million for FY20.
"That forecast was utterly derailed, first by the devastating bushfires which directly impacted 20 per cent of our store portfolio over the Christmas period, then by COVID-19 which saw us close all 1333 stores for 9.5 weeks including the peak Mother's Day trading period," he said.
"There is no road map to navigate these circumstances, but our operational priorities have been ensuring team and customer safety, reducing inventory and maintaining a strong cash position."
The news comes just days after Mosaic's increasingly nasty spat over rent made headlines.
Last week, Scentre Group - the Westfield shopping centre chain's parent company - made the call to temporarily lock down stores owned by Mosaic Brands, leaving more than 400 jobs on the line.
The dispute arose after Mosaic and several other brands either refused to pay rent or only paid a lower rate while COVID-19 lockdowns were in place.
Mosaic chairman Richard Facioni condemned the landlord's decision to halt trading in the current retail climate.
"These actions are extremely disappointing given the current environment, and difficult to comprehend in the context of a relationship that spans close to 40 years," he said in a statement sent to news.com.au at the time.
"Mosaic continues to conduct rental negotiations in good faith with all landlords, including Scentre Group, in the spirit of sharing the burden of the impact of the COVID-19 crisis, consistent with government recommendations."
Mosaic Brands is Australia's leading specialty fashion retail group, with the Millers, W.Lane, Noni B, Rivers, Katies, Autograph, Rockmans, Crossroads and Beme brands in its network of 1332 Australian stores, and with 6800 employees on the books.