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Why the Mosaic (ASX:MOZ) share price is rocketing 23% today

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Shares in Mosaic Brands Ltd (ASX: MOZ) are entering the stratosphere today after the company reported a positive trading update for the first half of FY21. During the first 30 minutes of trade, the Mosaic share price hit an intraday high of $1.19.

Some profit taking has, however, since led the company’s shares to retreat to $1.08 (at the time of writing), up 22.73% for the day so far.

What’s driving the Mosaic share price?

The Mosaic share price is shooting the lights out today after the clothing retailer advised it has returned to a path of profitability following a robust performance for the first half of FY21.

For the period ending 27 December, Mosaic delivered online sales growth of 31% on the prior corresponding period. This was attributed to the company seeing its largest ever lift in online trading over the Black Friday event. Sales jumped up by 100% compared to last year’s annual shopping day. Mosaic also reported it now offers more than 350,000 products online compared with 250,000 three months prior.

A strong Christmas trading period also followed the Black Friday event, leading the company to remain resilient despite COVID-19 renewed fears. While December sales were 4% lower than the  prior comparative term, Mosaic advised that its ongoing focus on improving margins resulted in only a 5.6% margin drop for the entire first half, when compared to the same time last year.

As a result of the improvement in trading conditions, the company expects earnings before interest, tax, depreciation and amortisation (EBITDA) to exceed market forecasts. It revealed that EBITDA is likely to come in between $40 million and $45 million, reflecting a 22% to 38% increase over the first half of FY20.

Mosaic highlighted that at the end of the calendar year, it had a healthy net cash balance of $65 million. This represents a huge uptick on the previous $4.5 million registered on the company’s books last December and is likely helping to drive the Mosaic share price higher today. 

What did the CEO say?

Mosaic CEO Mr Scott Evans hailed the favourable result, saying:

As stated in 2020 we are seeing profound and permanent shifts in the retail sector. We have moved swiftly to embrace this by realigning our rental costs, store footprint and rapidly building our online offer.

Mosaic share price in review

The Mosaic share price has been on the road to recovery over the last nine months. In March, Mosaic shares fell to an all-time low of 19.5 cents, after reaching as high as $1.84 in February.

Based on the current Mosaic share price, the company commands a market capitalisation of around $85 million.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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