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Why the Mosaic Brands share price is crashing 15% lower on Tuesday

James Mickleboro
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The Mosaic Brands Ltd (ASX: MOZ) share price is crashing lower on Tuesday following the release of a trading update.

At the time of writing the fashion retailer’s shares are down 15% to $1.92.

Why is the Mosaic Brands share price crashing lower?

This morning Mosaic Brands, formerly known as Noni B Limited (ASX: NBL), revealed that the devastating bushfires burning across Australia have impacted its businesses. These include brands such as Noni B, Rivers, Millers, W Lane, Autograph, and Beme.

According to the release, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the first half of FY 2020 is expected to be in the region of $33 million. This represents an increase of approximately 13% over the same period last year.

Half year reported EBITDA (after non-recurring project costs) is expected to be ~$32 million, up 36% from $23.5 million a year earlier.

Whilst on paper this is still solid growth in a challenging retail market, it has fallen well short of expectations.

Management advised that comparable sales through the second half of November and throughout December, a massively important sales period for the company, were significantly impacted by the ongoing bushfire tragedy.

Approximately 20% of the company’s stores have been directly impacted by the fires. Furthermore, almost one-third of its total 1,386 stores are located in regional areas, where consumer confidence has been particularly fragile.

As a result, comparable sales for the half were 8% lower than the same period last year.

Second half expectations.

Management appears optimistic that things will be better in the second half.

It advised that it is “well prepared for the second half, with a dedicated team, excellent product and a healthy stock position.”

As a result, it is “confident of delivering consistent earnings growth in the future, subject to external conditions.”

“Second half earnings are anticipated to demonstrate higher growth, relative to FY2019, than in the first half, particularly given the extraordinary external factors that have impacted first half revenue,” it concluded.

The post Why the Mosaic Brands share price is crashing 15% lower on Tuesday appeared first on Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020