Oroton profit slides

oroton signOroton Group’s net profit after tax fell 68 per cent from $8.3 million in FY14 to $2.6 million for the full year ended July 25, in line with the company’s revised guidance.

The luxury accessories retailer’s earnings almost halved as it began implementing a new strategy to repositioning its core Oroton brand.

Earnings before interest, tax, depreciation, and amortisation fell to $10.9 million from $18.8 million but the sale of its stake in Brooks Brothers Australia to the brand’s US parent in July helped offset trading losses from the joint venture.

The company paid a fully franked final dividend of 6.5 cents per share, down from 16 cents.

“FY15 was a challenging year with the results reflecting the short term effects of repositioning our core Oroton brand to a true affordable luxury positioning, the expansion of the Gap brand and a full year of losses of the now exited Brooks Brothers Australia joint venture,” said Oroton Group CEO, Mark Newman.

Oroton also encountered costs from the closure of its Hong Kong store and Singapore regional office.

Newman said the Oroton strategy included reducing the level of discounting and strategic initiatives to lift customers perceptions of the brand.

“These include our new international quality store concept, higher average selling prices and average transaction value, because of increased average price points and limited edition products and our first full year with international Australian actress, Rose Bryne, as the face of the brand,” he said.

“These initiatives have, however, come at a cost of reduced sales and earnings this year and although the reduced levels of discounting resulted in an increase at margin at constant currency, this was offset by a lower AUD/USD rate, despite being well hedged.”

During the year Oroton also invested in technology and marketing to maintain its position “as a leader in e-commerce and customer engagement”. The company is rolling out new POS and CRM platforms and has increased spending in digital, social and affiliate marketing.

For the Gap brand, Oroton Group opened three new large format stores to double its network. The large format “Combo” stores carry the full product offer for women’s, men’s, kids, and baby ranges.

Gap’s like for like sales were on par with the year before and like for like net margin dollars increased thanks to efficient management of promotion plan and better quality inventory. The gains were offset by the costs of adding to the store network.

Newman said the business had positive momentum entering FY16.

“It is pleasing to note positive and accelerating momentum from all of the initiatives that we’ve undertaken, with the group like for like sales growth in the first seven weeks of 11 per cent, together with the benefit of the Brooks Brother exit, all being supported by a continuing strong balance sheet,” he said.

Read more about Oroton’s strategy here. 

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1 comment

  1. Brett Stevenson posted on September 17, 2015

    I must admit this reads more like a PR statement from Oroton Group putting a positive spin on a pretty dismal performance. It's worth noting that the CEO's remuneration increased during the year while the profits were down by almost 70%. I guess the Remuneration Report will somehow justify that with some more complicated calculations. I also note that the auditors (PwC) managed to obtain 43% of their fee from non-audit work. I think Oroton should tell us just how much they paid consultants and other outside experts to do the sort of work they employ management to do. Were PwC paid fees for strategic advisory work? Is this a case of 'like McKinseys at Woolworths" or is the Oroton stratgy a generally in-house initiative which the Board has overseen.

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