Mosaic Brands facing losses

Women’s fashionwear chain owner, Mosaic Brands (ASX:MOZ), has joined the emerging list of retailers (including KMD and City Chic) confessing to weak trading and possible or actual losses ahead of the end of their 2023-24 financial years.

Mosaic outlined a series of problems that have made trading tougher than it was already in the June 30 half-year. The bottom line is that these problems mean it will report a small loss at the operating EBITDA level, but the company expects to rebound in 2024-25.

KMD Brands warned that its earnings could more than halve for the year ending July 31 as a recovery in sales stalled. The company sought the help of its banks to relax restrictions on debt to allow it to ride out the pressures.

Although it didn’t explicitly state so, KMD is looking at a loss after tax and perhaps write-downs of impairments.

City Chic Collective is trying to raise $27 million in new capital from investors to help tide it over, on top of selling a US asset for $18 million and taking a book loss. City Chic has seen a 30% drop in sales for the year and forecasts losses of more than $9 million.

In its statement, Mosaic detailed a tale of woe. It said it "was negatively impacted during the half by disruptions as it migrated to a fully integrated logistical supply chain and distribution system with a newly appointed global partner."

"The implementation disruptions experienced by Mosaic were greater than anticipated, delaying the delivery of inventory leading into the key Mother’s Day trading period. This, combined with softness in consumer spending, severely impacted revenue and earnings in the fourth quarter.

"As a result, the Group now expects the full-year result for FY24 to be a marginal loss at the Operating EBITDA level. Notwithstanding the disappointing result for the second half of FY24, the Group anticipates a recovery in the first half of FY25."

"The issues experienced moving to the new logistics model have now been largely resolved and inventory is normalizing across the Group, with comparable sales improving throughout June.

“Further, the first half of FY25 will benefit from a 20% increase in inventory intake at a 10% lower cost price compared with H1 FY24. FY25 will also benefit from the material annual cost savings associated with the new logistics partnership,” the company explained.

It said it "continues to closely manage its working capital position during this period and is continuing to progress the terms of a refinancing or extension of its outstanding convertible notes.”

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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