Millers owner Mosaic Brands calls in administrators after push-back on its restructure plan

Fashion retailer Mosaic Brands (ASX: MOZ) has appointed voluntary administrators, ending months of speculation about the company’s future that led to an announcement in September that it was exiting five of its brands and closing more than 200 stores nationally.

However, the company’s board has hinted that this is not the end of the business with hopes it can work its way through the administration process through a formal restructure process, after facing push-back from a number of stakeholders on its own proposal to shore up the company’s position.

Mosaic Brands has appointed Vaughan Strawbridge, Kathryn Evans, Kate Warwick and David McGrath of FTI Consulting as administrators who will pursue the restructure in the face of a challenging retail environment.

The move has been accompanied by the appointment of KPMG’s David Hardy, Gayle Dickerson, Ryan Eagle and Amanda Coneyworth as receivers and managers to work with the administrators through the restructure process.

“Following recent attempts by the company to informally restructure its operations, the board of Mosaic has determined that voluntary administration is now the most appropriate way to restructure the group,” says the company in an ASX announcement.

“These initiatives have included rationalising the group’s brand and store portfolio and focusing on key growth brands, reducing costs and improving Mosaic’s working capital position.

“This process has involved discussions with a wide range of stakeholders, both locally and internationally, including Mosaic’s senior secured lender, suppliers, service providers, landlords and the Australian Competition and Consumer Commission (ACCC).”

Mosaic says its leadership team has been supported by “a significant majority” of its commercial partners during this process and the company says it is confident that the restructure is in the best interests of all stakeholders that it aims will lead to a “more focused and financially stronger retailer, with the expectation that its securities would resume trading on the ASX”.

“However, a small number of parties declined to support the restructuring proposal or negotiate a commercial outcome, and a commercially acceptable resolution could not be reached with the ACCC,” says the company.

“Accordingly, Mosaic’s board made the difficult decision today to appoint administrators.”

Mosaic Brands retail operations comprise Rivers, Katies, Noni B, Millers, Autograph and W Lane which total more than 700 stores in Australia and New Zealand.

Last month, Mosaic announced plans to exit Rockmans, Autograph and W.Lane which would lead to the closure of more than 200 stores as the company looked to stem its financial losses and keep the business afloat. It also planned to wind down its pure-play digital platforms Crossroads and BeMe in a move to further shed non-core business assets.

A statement from KPMG says the appointment of administrators follows “a difficult period for the business which has faced a number of structural challenges and disruptions relating to suppliers and inventory management”. 

“The Mosaic Brands group owns a portfolio of iconic fashion labels whose clothing and products are much loved by generations of Australians,” says KPMG Australia’s turnaround and restructuring partner David Hardy.

 “We will be seeking to stabilise the operations of Mosaic to preserve the underlying value of the business while endeavouring to serve its customers, with support from its employees and suppliers to minimise business interruption.”  

The receivers plan to overseeing the trading operations of the group, whilst the administrators will be looking at offers to recapitalise or acquire the Mosaic Brands group.

Mosaic sees the path to a restructure involving a focus on its core brands of Katies, Millers, Noni B and Rivers, while also resolving legacy issues with a view to “right size the store network”.

“Mosaic Brands continues to be an exciting opportunity to reshape a business with a clearly defined market proposition for its target customers, and employees, that we can be proud of,” says CEO Erica Berchtold.

“Our priority is to accelerate the rationalisation plans we have in place to focus on the core brands to service current and attract new customers across metropolitan and importantly regional Australia.”  

The Mosaic board says it is grateful to the “majority of long-standing partners who supported its effort to negotiate an informal restructure of the group”.

“With the group continuing to trade, management intends to progress its brand rationalisation and wider restructuring plan, and to focus on the key Christmas and holiday trading period,” says the company.

“The board wishes to reiterate its belief to those who supported the restructure, to Mosaic’s customers and, most importantly, to Mosaic’s dedicated team across Australia, that the business has a long-term future.”

Shares in Mosaic Brands were suspended from trading on 2 September 2024 by the ASX for failing to lodge its FY24 financial results.