Analysts have warned investors could be in for a slew of bushfire-related trading downgrades at listed retailers following Noni B owner Mosiac Brands flagging a "significant" hit to sales as a result of the crisis.
Shares in the ASX-listed parent company of clothing retailers Noni B, Rivers and Millers plunged 17 per cent on Tuesday after it said 277 of its 1389 stores across the country had been "directly impacted" by the fires, causing an 8 per cent drop in comparable sales for the December half.
Listed fashion retailer Mosaic Brands, owner of Noni B, has warned comparable sales for the first half will decline 8 per cent.Credit: Cassandra Hannagan
Mosaic's other brands include W Lane, Katies, Rockmans, Crossroads, Autograph and Beme.
More than 30 per cent of Mosaic's stores are in regional areas, where consumer confidence has been "particularly fragile", the company said. The brunt of the sales drop came during the critical Christmas trading period, which retailers rely on to fuel their results.
Morgans analyst James Barker said the group’s bushfire-affected downgrade may not be the last for listed retailers as the corporate sector prepares its half-year results for February.
"There’s the potential for bushfires to affect second-half trading updates as we come around to results time considering its impact on the back end of December," he said.
"Also, with the fundraising efforts, some discretionary income may have gone towards money raising, which is a good thing but it means it’s not being spent in-store."
Mr Barker said not all retailers would be hit equally, noting it would depend on their market segment and their level of regional exposure.
JP Morgan analyst Shaun Cousins told clients in a note last week the fire crisis and consistent smoke haze blanketing major cities would likely lead to negative consumer sentiment, noting consumers were "unwilling to spend when others are struggling".
Regional stores have also been hurt by a drop in tourism and operational constraints, with fires limiting opening hours and supply routes.
Negative impacts from the bushfire crisis are yet another blow to the struggling retail sector, which is being hit by weak spending and the failure of interest rate cuts and the Morrison government's tax cuts to encourage shoppers to open their wallets.
There was a bright spot for the sector last week when Australian Bureau of Statistics revealed retail sales had increased by 0.9 per cent in November to a record $27.9 billion on the back of Black Friday and Cyber Monday promotions. However, economists are concerned December's figures may show a sharp drop in Christmas spending.
Mr Barker said Mosiac's 8 per cent drop for the half indicates the group's comparable sales across November and December dropped by double digits.
Mosaic's shares closed down 17.7 per cent to $1.86 on Tuesday, a sharp drop Mr Barker said reflected investor concerns that sales issues would persist throughout the remainder of the fire season.
Despite the sales deterioration, Mosaic said its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) for the December half would be around $33 million, an increase of 13 per cent. It also said it would maintain a dividend payout ratio of 60 to 70 per cent of profit after tax.
It also noted earnings in the six months to June would likely show higher growth, particularly due to the "extraordinary external factors" affecting the first half.
Mosaic has made a donation of $50,000 to St Vincent De Paul's bushfire appeal and has also pledged to donate clothing with a cost price value of $860,000 to charity GIVIT.