Mosaic
- CEO's Statement - May 2007
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The last year has been a very exciting and challenging one for Mosaic, as the Group completed the acquisition of the Rubicon Group and began to integrate it. This has, at a stroke, doubled the Group’s turnover and established Mosaic in the top echelon of UK fashion retail.
Mosaic’s strategy is to grow both organically and through acquisitions. The purchase of the Rubicon Group perfectly fits the Mosaic criteria for acquisitions: brands that operate in a similar part of the market; brands with similar distribution channels and a similar supply chain; and brands that offer potential synergistic benefits. The Shoe Studio gives us the ability to extend our clothing brands into the market of shoes and accessories, which can be achieved quicker by utilising The Shoe Studio’s distribution network that is pre-eminent in UK department stores and, increasingly, on an international scale.
As predicted, the UK market continued to be challenging and this year’s results partly reflect market conditions. Nonetheless the past year has seen the Group make good progress in delivering its long term strategy. We have successfully completed the integration of Karen Millen and Whistles and I am delighted to report that our Distribution Centre is now operating efficiently and effectively under the leadership of its new Distribution Director. International expansion has always been a key part of our strategy in order to reduce the Group’s dependency on its home market. During the year we have not only built on our existing relationships but have also taken measures to increase our global reach. In the last year Mosaic opened 71 new international outlets and now has a presence in 34 countries.
Despite the excellent international expansion, maintaining a successful base in the UK remains one of our top priorities. During the year our brands achieved further growth in the UK, opening 31 UK solus stores and expanding our concession portfolio with an additional 108 concessions opening.
During the year the Oasis management team was strengthened with the appointment of Sharon O’Connor as Managing Director. We also appointed a new Merchandising Director and Finance Director. The new senior management team have conducted a thorough review of every element of the business and are implementing a programme to reaffirm the brand’s aspirational market positioning. Their enthusiasm and determination is already apparent in the new season’s ranges. During the year we opened 4 solus stores and 15 concessions in the UK, mainly in new retail developments.
Coast’s stellar performance continued through the first half of the year at an unprecedented rate. Inevitably as the year progressed, other fashion retailers responded to Coast’s success by introducing competing ranges of occasionwear. This had the effect of slowing Coast’s performance in the second half. The Coast team is focused on defending its dominant position in the market for occasionwear through the introduction of more luxurious and desirable ranges and improved service. To support this focus, we opened a separate ‘Coast by Appointment’ floor in our Regent Street flagship store. This floor caters specifically for the needs of brides looking to purchase outfits for themselves and their bridesmaids. This concept has been exceedingly well received and we anticipate opening further salons where space allows in our city centre stores. Over the year, Coast delivered a substantial increase in profits and opened 12 solus stores and 9 concessions in the UK.
Karen Millen delivered a strong all-round performance. During the year the range was extended to include separate collections of glamorous jetset casualwear, confidence inducing workwear and a collection to provide the perfect ‘occasion’ outfit. All the collections are complemented by a full range of accessories. Marketing and PR activities have been increased in an effort to enhance global brand awareness. Growth has been achieved both internationally and in the UK with 15 new stores opening, including a spectacular flagship in Grafton Street, the premier shopping street in Dublin.
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The Whistles brand has had a difficult year and one that has required significant effort from all involved to take advantage of the opportunity afforded by the growth in the contemporary fashion market. I am confident that the new team, headed by Amanda Burrows as Brand Director, will drive the brand forward, as they have a strong vision of where the brand is going and how they will build on its heritage, especially in designer knitwear. We are already rolling out a new store concept which delivers this new proposition. We have also reviewed our outlet strategy and have opened very successfully in upmarket village locations such as Chiswick and Muswell Hill in London, which has confirmed our confidence in the brand’s new positioning.
The acquisition of the Rubicon brands occurred in October so it is appropriate to comment on their performance in the final quarter. Warehouse had a very strong final quarter after hitting the young fashion looks very strongly. The team is focused and the brand has continued its strong performance into the new financial year. Principles is an exciting addition to the Group as it caters for the fashion needs of slightly older women. The brand’s mission, ‘making sense of fashion’, gives it a clear position in the contemporary market. After a difficult Autumn, Principles had a very strong Christmas Sale and the new Spring ranges have performed well.
Shoe Studio had a difficult Autumn due to the lack of seasonal weather. This had a particularly adverse effect on sales of boots; however promotional activity ensured that closing stocks were clean, enabling us to launch the Spring range with conviction. As we learn more about Shoe Studio, we are increasingly excited about the opportunity to extend our clothing brands. The teams are already developing an inaugural range of shoes for Warehouse and early discussions are taking place for the launch of Coast shoes and Karen Millen shoes and bags into selected department stores from Autumn 2007. In addition, together with the new management of the House of Fraser department store group, we have identified a number of prime locations on fashion floors within their store portfolio where we will jointly launch young fashion shoe and accessories departments showcasing Bertie, Warehouse and Oasis in particular.
Both Warehouse and Principles achieved excellent results from their transactional websites in the final quarter of the year, with sales exceeding all expectations. Oasis launched its e-commerce site in September and confidently beat its targets throughout the balance of the year. We plan to launch
e-commerce sites for the remainder of our brands through 2007 and are confident, given the experience of our new brands in this area, that we have a significant competitive advantage in this sector.
Since the acquisition we have launched a major programme to identify and share best practice in our operations and to identify opportunities for combining our shared services operations where appropriate. We have already combined the distribution operations, are well on the way to integrating the finance function and have embarked upon a project to manage the convergence of the IT systems. Whilst synergies were not the driving force of the acquisition, we anticipate achieving material savings from these areas which will start to accrue from mid-2007 and will be realised mid-next year.
Derek Lovelock
Chief Executive Officer -
