Fashion chain Noni B sees ‘significant’ sales drop due to bushfires
The ASX-listed parent company of popular clothing retailers Noni B, Rivers, and Millers has warned that sales in its stores were hit by the “significant” impact from the bushfire crisis.
In a statement to the market on Tuesday morning, Mosaic Brands said 20 per cent of its 1,389 stores across the country had been “directly impacted” by the fires, which would lead to an 8 per cent drop in comparable sales for the December half. Mosaic’s other brands include W Lane, Katies, Rockmans, Crossroads, Autograph and Beme.
Thirty-two per cent of the company’s stores are in regional areas, where consumer confidence has been “particularly fragile”, the company said. The brunt of the sales drop came during the critical November and December trading period ahead of Christmas, which retailers rely on to fuel their results, it said.
This will see Mosaic’s comparable sales for the six months through December fall 11.1 per cent, a significant deterioration on the group’s 3.1 per cent sales decline in the prior half-year period.
However, the company’s underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the December half are predicted to be around $33 million, 13 per cent up on 2019’s result for that period.
During periods of national disaster, consumer sentiment can be negatively impacted as consumers are unwilling to spend when others are struggling.
JP Morgan analyst Shaun Cousins
With the country’s major cities blanketed in smoke haze and high fire danger in many parts of New South Wales, it’s likely investors will see trading updates similar to Mosaic’s as retailers approach the half-year reporting season.
While companies are still coming to terms with the full effects of the devastating fires, analysts have warned of broad impacts from drops in consumer confidence linked to the bushfires.
“During periods of national disaster, consumer sentiment can be negatively impacted as consumers are unwilling to spend when others are struggling,” JP Morgan analyst Shaun Cousins said in a note to clients last week.
Coupled with weak spending, regional stores have also been affected by a drop in tourism and operational constraints, with fires limiting opening hours and supply routes.
Listed tourism company Apollo warned shareholders on Monday it would struggle to meet its first-half forecasts, saying domestic last-minute bookings had been impacted by fires, and global reporting of the crisis would likely affect future bookings.
Despite the sales deterioration, Mosaic said it would maintain a dividend payout ratio of 60 to 70 per cent of profit after tax. It also noted earnings in the six months to June would likely show higher growth, particularly due to the “extraordinary external factors” affecting the first half.
Mosaic has also made a donation of $50,000 to the Vinnies fire appeal and has also pledged to donate clothing with a cost price value of $860,000 to charity GIVIT.
Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.
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