Oroton’s bumper profit growth

Oroton EmporiumHandbag and accessories retailer Oroton hopes to attract younger customers with new luxury designs and revamped stores, amid stiff competition from Michael Kors and Mimco.

Oroton said the first seven weeks of its 2016/17 fiscal year had been “encouraging”, with growth in comparable sales from stores that had been open for at least a year, an improvement on the final quarter of 2015/16.

Oroton’s profit in the year to July 30 rose 31 per cent to $3.4 million, bolstered by a 3.3 per cent rise in revenue and a sharp drop in financing charges.

Annual comparable sales rose two per cent, an improvement on the prior year, due in part to its revamped store layouts.

Mark Newman, chief executive, said new products by a designer poached from Mimco have sold well in the early stages of spring, and there are several more products set to be rolled out for summer.

“Our two best selling bags from the start of the spring season, so seven weeks into the spring season, are both bags that our new designer fast-tracked into the business,” Newman said.

Bags, jewellery and shoes retailer Mimco is a strong business that Oroton keeps a “very close eye on,” he said.

“I think that they have done a good job in diversifying away from handbags into categories like jewellery, and that’s something that we recognise and we think there’s an opportunity for us in that particular category as well,” Newman said.

US handbags, clothing and accessories retailer Michael Kors has been “increasingly aggressive” in the clearance and outlet business in Australia, he added.

Since taking control at Oroton in August 2013, Newman has focused on improving the brand’s appeal, particularly among younger buyers.

A year into his tenure he appointed Australian actor Rose Byrne as the face of the group, which was founded in 1938.

But Oroton’s earnings performance has been mixed in recent years.

It posted a 68 per cent drop in annual profit in 2014/15 as management moved away from heavy discounting, expanded its Gap clothing brand and ended its local joint venture with US retailer Brooks Brothers.

Oroton shares were steady at $2.30 at 1505 AEST, well off their high of $9.50 in February 2011.

Newman said the company had ended its aggressive discounting of previous years, closed loss-making or marginally profitable stores, and halved its international losses.

“As we concluded the second year of transformational change, it is pleasing to see the group return to a period of stability and growth in earnings, with a 31 per cent improvement in net profit after tax. We built on the underlying EBIT growth of eight per cent reported in the first half, and achieved a 15 per cent growth in underlying EBIT for the full year,” Newman said.

Oroton said it posted a 19 per cent increase in EBITDA to $12.9 million through effective management margin, currency and costs, and declared a final fully franked dividend of 3.0 cents per share, a 50 per cent increase from the previous year.

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