The Mosaic Brands share price surges 21% on lease deal

The Mosaic Brands share price has surged today on news the specialty fashion retailer has clinched a new lease agreement

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The Mosaic Brands Ltd (ASX: MOZ) share price is up 20.8% in late afternoon trading today. Meanwhile the All Ordinaries Index (ASX: XAO) has a more meagre 0.1% intraday gain.

Mosaic’s huge daily share price gain follows an ASX announcement this morning that it had reached successful lease negotiations with Scentre Group (ASX: SCG). Scentre’s share price is up 3.2% at time of writing.

Despite the welcome boost, the fashion retailer has a long way to go before recouping all of its 2020 share price losses. As you’d expect, the COVID-19 pandemic is to blame, crashing the Mosaic Brands share price down 65% from 16 February to 24 March.

After today’s strong rally, however, Mosaic’s share price is now up 56% from the March low.

Mosaic Brands – formerly Noni B Limited – is the largest specialty fashion retailer group in Australia. Brands include Noni B, Millers, Rockmans, Katies, Rivers, Autograph, Crossroads and Beme, among others. Mosaic’s shares began trading on the ASX in 2000 and the company now almost 1,400 stores across Australia.

Why is the Mosaic Brands share price surging?

Like the majority of retailers across Australia, and indeed the globe, Mosaic Brands has taken a big revenue hit from store closures and social distancing measures during the coronavirus pandemic.

Mosaic has been negotiating rental terms with landlord Scentre Group. This morning, it announced that after reaching a successful outcome in negotiations, all of its stores in Westfield shopping centres have reopened, with the exception of Victoria. Mosaic’s stores in Victoria are still closed until the stage 3 and 4 restrictions are lifted.

Mosaic Brands chair Richard Facioni said:

We’re pleased to have reopened our Westfield stores over the weekend following a mutually agreeable outcome to our negotiations with Scentre Group. Our Victorian stores remain temporarily closed for health and safety reasons. We look forward to reopening those stores as soon as it is safe for our team and customers to do so.

We have had a long-standing relationship with Westfield, enabling us to reach a solution that worked for both parties. This is a good outcome for Mosaic and, in particular, the 400 affected team members. As we noted last week, shuttered stores work for no one.

The commercial terms of the new agreement with Scentre remain confidential.

Mosaic is continuing to negotiate with landlords across Australia for viable lease terms that take into account the viral-induced shift the company has experienced in the retail rental market. Mosaic is working to minimise future store closings, but still foresees the potential shuttering of 300-500 of its stores over the next 1-2 years.

After today’s surge, Mosaic’s share price will be one to watch heading into September.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Scentre Group. 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.

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