Mosaic Brands, the largest fashion retailer in Australia by store count, formally went into administration in late October 2024. At the time, the company ran 650 stores around the country and featured ten private labels, including Katies and Noni B. With deep debts owed to many creditors, it drew concerns about its spending practices and governance.
The retail landscape has shifted enough over the last three years that it would make sense to provide an update. Soaring inflation and the primacy of e-commerce has compounded all of these changes. Retailers are in the middle of a “perfect storm.” To that end, an estimated 800 Australian retailers have gone under this year already. As a result, suppliers from countries such as China and Bangladesh are now bearing the brunt of Mosaic Brands’ financial failures, with many calling for a public inquiry into the company’s actions.
Mosaic Brands’ losses on paper were mind-boggling—more than $360 million to creditors in the U.S. and abroad. One of the victims is Harry Wang, who lost US$6.2 million (~$9.5 million) dollars. Shirley Lu, by his side, is owed US$60,000 (almost $92,000). According to reports, Mosaic Brands had defaulted on its payments for several years. Preliminary findings like this even point to the company having traded insolvently as far back as December 2020.
The company’s troubles intensified as it discovered how far its fortunes rested on a legal shield called safe harbour. This provision is intended to protect companies in periods of fiscal adversity. With Mosaic Brands’ predicament, we may be witnessing a key test case of this law. The company has been on the acquisition trail, buying out Australian brand Rivers in 2018. This expansion did not deliver the expected fiscal stability.
Given these changes, the suppliers we’ve convened have made it clear that they are upset and deeply concerned. Harry Wang articulated his predicament, stating, “We have no choice. We’d be pushed to deliver the goods. Otherwise, we really don’t have any payment … So we have to keep on supplying them.”
Wang further criticized Mosaic Brands’ business practices, labeling them as manipulative: “That’s a trick for all the suppliers … a kind of blackmail.” He poignantly reflected on the impact of the company’s collapse on his life: “All of our wealth, after all our hard work, was suddenly wiped out by them. I’m so sad.”
Professor Jason Harris remarked on the risks associated with insolvent trading: “You’re more likely to get bitten by a shark on George St in Sydney than you are to be prosecuted for insolvent trading.” So rare, in fact, that enforcement actions by the Australian Securities and Investments Commission (ASIC) prompted his colleague, Prof. This lack of accountability incentivizes firms to cut corners with no fear of repercussions.
In Australia, ASIC seldom prosecutes, and liquidators frequently do not have access to the capital necessary to follow through on cases. As a direct consequence, the miscreants understand that they’re almost certain to never face any consequences for their malfeasance. Harris added.
Moreover, he highlighted a concerning statistic: “More than 90 percent of companies that go into liquidation give nothing to unsecured creditors.” This situation is cause for concern about the future of the victims who are now scattered in Mosaic Brands’ wake.
Scott Evans, the chief of staff with Mosaic Brands, admitted that the company had difficult news ahead but declined to answer in-depth questions. He stated, “Given the current circumstances of the company it is difficult … to provide substantive comments.” He hinted at misinformation circulating about the company: “Based on some of the questions and propositions that have been put to me, there seems to be material misinformation about the company, which I believe will be clarified in the fullness of time.”
As investigations unfold and creditors await answers, the ramifications of Mosaic Brands’ administration will likely echo throughout Australia’s retail sector and beyond. Now suppliers are calling for greater transparency and accountability. Instead, they’re faced with millions, even billions, in financial losses directly linked to their business with the recently shuttered retail giant.
