For a company worth less than $7 million on the ASX, Mosaic Brands (ASX:MOZ), the women’s wear retailer, certainly generates a lot of media stories.
In fact, it’s not the retailer that is attracting coverage so much as its struggles to survive as the owner of the Katies, Noni-B, and Millers chains.
Lately, it has faced weak sales, technology issues, financial pressures, and scrutiny from regulators over sales promises allegedly made but not met.
On Wednesday morning, the Financial Review reported that Mosaic directors were talking to advisors about its problems. That saw the shares slump 24% to a new low of 24 cents.
Directors asked for a pause in trading and then, just before midday, issued a statement with trading back on. The shares edged up to 4 cents, still down 13% from Tuesday.
In the statement, the company confirmed the talks with advisors, Deloitte, about options to refinance and restructure the company as it struggles to recover from the slump in consumer spending, a botched technology rollout, and poor sales.
It said it had engaged Deloitte to advise on “refinancing considerations,” including safe harbor provisions, as revealed by the Financial Review.
“The group wishes to confirm that its directors have and continue to take advice from advisors on their ongoing duties. These fiduciary obligations are matters the board has always taken seriously, and we confirm that the advice provided has extended, from time to time, to considering the applicability of, and compliance with, the safe harbor provisions,” the company said in a statement.
“The group confirms that during this time, Deloitte has been advising the company on refinancing considerations that have previously been announced to the market.”
Safe harbor provisions protect company directors, who are responsible if a company trades while insolvent, from personal liability for debts incurred by an insolvent company if they take action that will lead to a better outcome for the company and creditors than if it were to appoint external administrators.
Using this provision is not a good look to investors and trade creditors—it’s like telegraphing that the company has big financial issues.
Mosaic Brands expects to report a deeper loss for the 2024 financial year in the range of between $15 million and $20 million, partially driven by disruptions from a botched technology migration project to a new logistical supply chain platform.
This impacted Mother’s Day trading to a degree that was “greater than expected,” delaying the delivery of stock to stores in the lead-up to Mother’s Day.
“This, combined with softness in consumer spending, severely impacted revenue and earnings in the fourth quarter,” Mosaic said in a statement issued on June 21 trying to explain its continuing underperformance.
Mosaic is also fighting legal action from the ACCC over claims it failed to meet advertised delivery timeframes for several hundred thousand products that some customers paid for but were not delivered.
The company says it will release its 2023-24 results and a first quarter outlook on August 28.