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Fashion retail group Mosaic Brands (ASX: MOZ) has announced a sharp turnaround in fortunes with a forecast return to underlying profit this financial year after enduring what the company describes as "the toughest 18 months possible".
The news sent Mosaic shares more than 24 per cent higher in early trading, lifting them off seven-month lows.
Mosaic Brands, the owner of Autograph, Crossroads, Katies, Millers and Rivers, is targeting a full-year underlying EBITDA of about $48 million for FY21, so long as there are no widespread lockdowns.
The figure is expected to rise to $50 million in FY22, as customer confidence and shopping patterns return to normal.
The forecast result compares with an EBITDA loss of $45.8 million in FY20, after a $49 million provision for rents.
The latest forecast excludes any contribution from New Zealand online retailer EziBuy, which is expected to be NZ$2.5 million ($2.33 million) in FY21, rising to NZ$5 million in FY22.
Mosaic says it has favourably renegotiated the option terms to take full ownership of EziBuy in September this year from June previously. Payment has been extended to 31 December 2021.
"After the toughest 18 months imaginable including the bushfires and COVID-19 pandemic, we are confident that Mosaic Brands has come through stronger and better with a very clear path to returning to our year-on-year track record of profitability and growth," says Mosaic CEO Scott Evans.
"Aligned with the vaccine roll-out, since Easter every week sees more and more of our customers heading back into store.
"Encouragingly, even with the gradual return to normalised shopping behaviour, our online sales continue to perform well and grow."
Evans expects total group online sales to account for 30 per cent of revenue after exercising the EziBuy option.
Mosaic sees the EziBuy acquisition as a major step towards becoming a major omni-channel retailer of female apparel, supported by what it says is a permanent shift to online sales post-pandemic.
Mosaic closed 212 stores over the past year due to lockdowns and tough negotiations with landlords. The company says strong rental renegotiations have been achieved across its portfolio.
"Whilst some in the retail sector benefited from the COVID -19 stimulus, Mosaic Brands faced a unique set of challenges due to our more COVID-sensitive customer which we are proud to say we have successfully navigated," says Evans.
"We have reshaped our cost base, our inventory holding and remained focused on margin rather than chasing sales at any cost. We believe that as a national retailer who made those difficult changes early, Mosaic Brands has never been in a stronger position to take on the future."
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