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Can Mosaic Brands Be Saved or is it a Zombie Company?
CEO at 6one5 Retail Consulting and Cultivar Group - The Retail & Sales Strategist
August 14, 2024
According to an article in the Australian Financial Review on August 6, 2024, ASX-listed clothing retailer Mosaic Brands has entered “safe harbour” as its directors seek to guide the company through a challenging period. With over 4,000 staff and reported revenue of $495 million in their audited 2023 financial statements, the outlook appears bleak for Mosaic Brands. The company has reported an EBIT loss of between $15 million and $20 million for the 2024 financial year. Can it survive? Based on a close look at the financials and a review of its portfolio of brands, I am skeptical.
A History of Struggles
Mosaic Brands is an amalgamation of brands from Specialty Fashion Group and Pretty Girl Fashion, restructured under the Noni B Public Company umbrella. In the 2020 financial year, the company rebranded as Mosaic Brands Ltd. Historically, these companies have faced ongoing challenges:
High Revenue but Low Profits: Despite high revenues, the company has consistently shown high stock levels and low earnings before tax (EBIT), often cycling between small profits and losses.
Low Sales per Store: With average sales per store hovering around $500,000, profitability is challenging when accounting for wages, rent, and head office costs.
Low Stock Turns: In the 2023 financial year, stock turns were 1.72, compared to the benchmark of 4 for successful fashion brands. Low stock turns indicate overbuying and carrying surplus and aged stock, potentially leading to overvaluation.
Tired Brands and an Aging Demographic
The brands under Mosaic are tired and have been so for many years. Queensland University of Technology Business School retail expert Professor Gary Mortimer, in a news.com.au article by Sarah Sharples on August 8, stated, “From a consumers’ point of view, and particularly with the brands they have like Millers, Katies, and Noni B – they are essentially creating multiple brands to market to the exact same audience – middle-aged, middle-class women.”
Most of these customers are not just middle-aged; many are baby boomers (born 1946-1964), who grew up with these brands. The youngest of this demographic are now 60, meaning 75% have reached 65 and are transitioning to retirement. In my opinion, most of these brands reached their expiration date in the early 2000s and have been kept alive only by private equity attempts to resuscitate and package them for sale. Unfortunately, the impact of COVID-19 and poor financial indicators have thwarted these efforts.
Key Mosaic Brands originated long ago, in an era far removed from today's fashion landscape. For example:
Rockman’s was established in 1937
Katies in 1956
Noni B in 1977
Millers in 1993
Mosaic Brands
Is There Hope?
Can Mosaic Brands be saved? In my opinion, no. The saying goes, “You can’t flog a dead horse.” The financials are dismal, the brands are outdated, and the market demographic is aging. The business model is fundamentally flawed, and the company has repeatedly failed to adapt to modern retail trends and consumer preferences. It’s time to accept the reality that some ventures are beyond saving and that resources may be better allocated elsewhere.
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