What began as a $1 turnaround punt on a "little unloved" company in 2019 was transformed into an earnings-generating e-commerce play for Mosaic Brands (ASX: MOZ), owner of apparel businesses such as Rockmans and W.Lane, but in the past six months that success has come crumbling down.
Mosaic - which also owns such brands as Katies, Noni B, Millers and more - decided to drop $11 million in October 2021 to buy the remaining 49.9 per cent stake in online fashion and homewares company EziBuy, which is primarily in New Zealand but has an online presence in Australia.
At the time Mosaic Brands CEO and managing director Scott Evans highlighted how the group had worked quietly and consistently in the background to turn the business around in an 18-month period, and in April last year the group received shareholder approval to go ahead with the payment.
By the end of FY22, EziBuy had 2.7 million members to its name and was processing more than 1.4 million orders a year to its customers on both sides of the Tasman Sea.
After the $11 million was finally spent in mid-2022, in Mosaic's annual report it stated the purchase would see the group "continue its online growth as customers move towards online channels which has seen a significant shift over the past two years".
That trend did continue to play out for most of Mosaic's businesses, but unfortunately not for the intended online stand-out EziBuy which saw its sales plunge by 51 per cent in the six months that followed.
Today Mosaic Brands has bitten the bullet and called in Katherine Elizabeth Barnet and Damien Mark Hodgkinson as administrators of EziBuy, which prior to its recent poor performance was profitable in both FY21 and FY22.
"The extent of EziBuy’s sales decline, particularly in the context of the group’s wider positive portfolio of online performance, prompted the board to conduct a strategic review of its operating and cost structure," Mosaic stated in an ASX release.
"Having considered the results of that review, the board determined that it was in the group’s best interests as a whole that the EziBuy business be restructured.
"Mosaic intends to propose a restructure to the administrator that would see EziBuy emerge as a simplified, profitable, cash-generative online-only operation, and one that is more strongly aligned with the Group’s successful digital strategies across its other brands."
Excluding EziBuy, online sales now account for 23 per cent of Mosaic's revenue and are up 68 per cent against pre-pandemic levels.
"The board believes this process to restructure EziBuy is in the best interests of the group’s shareholders as it will improve the group’s overall net asset position and operating cashflow," Mosaic said.
"Today’s announcement has no impact on any other of the nine retails brands within the group’s portfolio. The brands continue to benefit from the strong return to instore shopping post covid and have delivered +18 per cent comparable in-store sales growth for the January to March period against the prior year."
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