Mosaic Brands, owner of Noni B, Rivers and Katies, to close up to 500 stores as COVID-19 bites
The retail group behind clothing brands Rivers, Millers, Katies and Noni B plans to shut up to 500 stores following the financial blow of bushfires and COVID-19, amid an ongoing dispute with a major landlord.
Mosaic Brands says the leases on nearly 80 per cent of its 1,333 stores are expiring over the next two years and it anticipates closing potentially 300 to 500 of those stores over that time period.
The threat to permanently shut more than a third of its store network comes after 129 of its stores in Westfield shopping centres were closed by landlord Scentre Group, leaving hundreds of workers needing to be redeployed.
Some retailers and landlords have clashed during the pandemic over if chains should pay rent, and how much they should pay, after foot traffic tumbled during initial shutdowns, and some stores remain closed under renewed restrictions in Victoria.
The announcement came as Mosaic swung to a $170 million net loss for the 2019-20 financial year and said it would not pay a final dividend due to the ongoing uncertainty of the pandemic.
Mosaic chief executive Scott Evans said the group had performed solidly for the first third of the financial year, but then its forecasts were “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 1,333 stores for 9 and a half weeks including the peak Mothers’ Day trading period,” he said.
In January, Mosaic had warned that consumer confidence in regional areas, home to 32 per cent of its stores, was “particularly fragile”.
Rent dispute with Westfield intensifies
Today’s result included $49 million set aside for rental costs, but the company said it expected “materially lower payments” due to ongoing negotiations with landlords.
In the statement, Mr Evans put pressure on landlords, flagging hundreds of store closures, saying “some but not all landlords” accept the reality of the “fundamentally changed” retail rental market.
“Shuttered stores work for no-one, so we aim to minimise closures, but not on uncommercial terms.”
The escalation of tensions comes as Scentre Group slashed the value of its properties by $4.1 billion, as its retail tenants struggled with an 8 per cent drop in in-store sales during the first six months of the year, compared to last year.
Scentre said it had reached agreements with nearly 2,500 of its 3,600 retail partners, but included a blunt message to retailers not paying rent.
“Importantly, the structure of our leases with our retail partners has not changed and remains based on the mutual agreement to pay a fixed rent,” it said.