Australian fashion group Mosaic Brands is planning to open 40 new Rivers mega stores in FY24, with most of them situated in regional areas.
The Rivers brand already operates five in Australia so far, alongside 125 standard-sized stores, with the first 19 of the 40 stores pitted to open in the first half.
It comes as the group delivers a $33.5 million turnaround in its earnings before interest, tax, depreciation and amortisation (EBITDA) compared to FY22, from a loss of $16.4 million to a positive $17.1 million for FY23.
Comparable in-store growth for FY23 was 9.6% despite 148 fewer stores, according to Mosaic, with absolute sales growth of 6% compared to the previous corresponding period (PCP).
Mosaic Brands CEO Scott Evans said mega stores are typically three times more profitable than mall or standard-size stores.
According to the company, standard-sized stores generally accrue $440,000 in annual turnover, while mega stores can gain an average $1.5 million. Mega store sizes are between 500-1200 square metres.
The overall strategy will also include significant investment and rollout of a new group online platform, including AI-powered customer analysis, which is expected to be completed within the first quarter of FY24.
“Our BIG Strategy sees Mosaic Brands maintain and expand our core customer base, as seen in the Rivers brand, while drawing in an increasingly value-conscious cross-section of the community,” Evans said.
“The outcome is Mosaic Brands transitioning to become a more ageless, value-driven big-box retailer across Australia and regional Australia in particular.”
As well as Rivers, Mosaic Brands also manages brands such as Noni B, Millers, Katies, Autograph, Rockmans, Beme, Crossroads, W. Lane and EziBuy.
Speaking on the $33.5 million turnaround in EBITDA, Evans said it is not just a result of customers returning to stores.
“It is a recognition by the group that retail has forever changed, customer expectations have shifted dramatically and that resuming our consistent pre-Covid profitability required taking a leap forward rather than taking a step back.”
Evans cited the growth of online, which now contributes a fifth of group revenue and saw 4.4 million items shopped in FY23, and the shift towards big box retailing and away from higher-rent, smaller-format stores as key elements of the turnaround.
The group noted its ‘BIG Strategy’ for digital and stores has been driven by changing customers’ expectations and attitudes aligned with an increased demand for value-driven retail.
“Mosaic Brands has survived the pandemic-induced downturn and emerged as a more value-driven, operationally-lean, and strategically-focused organisation that has a clear vision as to where future growth opportunities in the retail landscape sit,” Evans said.
Looking ahead, Mosaic claimed that customer sentiment and confidence remains volatile, with June and July seeing a slowdown as a result of the most recent interest rate rises.
However, it added that August has seen a strong bounce back with the group’s in-store sales up 10% against FY23 for the month.
The group’s continued investment into digital continues with the move to a Salesforce platform to deliver its expanding local and international online offering. Mosaic noted the transition to this new platform throughout the first quarter is expected to impact digital revenue in the short term but will be completed before the key trading periods.
Mosaic noted a continued broad-based consumer flight to value should also support sales leading into Black Friday and Christmas trading. This is expected to be underpinned by its cost structure, with Mosaic reporting the cost of products for the first six months of FY24 is approximately 9% better than the prior period and lower than pre-COVID levels.
Logistics and shipping costs are also improving from the highs of FY23, according to the group, and rents have adjusted to deliver a better operating model.
Mosaic expects to continue its earnings growth in FY24.