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Today was a busy day of December half reporting for some of Australia's leading fashion retailers. City Chic Collective's (ASX: CCX) profit rose by a quarter to $13.1 million, while footwear giant Accent Group's profits were making tracks with a 57 per cent lift to $52.8 million.
At a snail's pace in comparison, Mosaic Brands' (ASX: MOZ) profit increased just 6 per cent to $13 million.
In a normal year investors may have found this news encouraging. Mosaic had previously been shattered by a $170 million loss in FY20 due to COVID-19, and its half-year profit reported today is higher than its entire NPAT for FY19 before the pandemic hit.
But the market has come to expect more than single-digit profit growth in the current environment of stimulus-backed spending.
The modest result combined with sobering comments from CEO Scott Evans were what likely sent MOZ shares plunging 14 per cent to $0.84 each.
It has now been more than 2.5 years since Mosaic - then known as Noni B - purchased the brands Autograph, Crossroads, Katies, Millers and Rivers from City Chic, adding to other iconic names such as W.Lane and Rockmans.
Interestingly, both Mosaic and City Chic reported almost identical statutory results for the first half, but CCX shares were down just 1.5 per cent and its market capitalisation is worth more than nine times that of MOZ.
The fact City Chic is worth close to $1 billion and Mosaic is worth just under $100 million goes to show valuations are all about growth prospects, and modesty is no virtue on the ASX.
"Given the unique demographic of our customers we did not see, nor expect, a short term stimulus sugar hit to sales," Evans said.
"However, conversely we are now planning for a longer term sustainable lift in sales due to post vaccine tailwinds as many of those same customers emerge from hibernation.
"As the vaccine rollout gets underway we expect our customers will more confidently return to spend in-store and shopping will resume as a social outing as opposed to a targeted mission."
The group's net cash rose by $5.4 million to $65.3 million, while underlying EBITDA growth was well into double-digit territory at 38 per cent.
In addition Mosaic notched record online sales, up 27 per cent year-on-year.
"The result was driven by a number of initiatives to reset the group for a post-COVID economy, including a continued focus on margin growth and reducing stock levels by $92 million, or 55 per cent.
"We also closed unprofitable stores and grew our online offering from 25,000 products to over 350,000 in just 12 months."
He highlights the group delivered consistent year-on-year profitability improvements until it reported a half-year loss for the first time as at June 2020.
"Whilst JobKeeper was an invaluable element in managing through the last 10 months, having now ended, Mosaic has transitioned through its toughest ever trading period, strengthened its balance sheet and returned to its track-record of profitability."
Whilst January data shows the recent trend of sales improvement has continued for Mosaic, the group has decided not to provide an outlook as the second half remains "particularly volatile with store or state-wide shutdowns remaining a real possibility until the vaccination program is completed".
As part of this approach, a dividend will not be issued.
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