Oroton fears earnings wobble

Upmarket retailer Oroton fears its first half earnings could fall because it has stopped slashing the prices of its luxury accessories for shoppers.

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Chairman John Schmoll says sales were lower in the first quarter of the financial year, compared to 12 months earlier when the retailer was offering more discounts.

He said a strategy to reduce discounting, combined with hefty lease provisions for the now closed Hong Kong store and continuing startup costs from Oroton’s joint venture with US classic clothing label Brooks Brothers, could cause a fall in half year earnings.

But Mr Schmoll told the company’s annual general meeting it was hard to give earnings forecasts as Oroton’s biggest trading months were just around the corner.

“We do anticipate though that the second half of FY15 will start to cycle these events and, accordingly, a return to modest underlying earnings growth for both that half and the full FY15 financial year,” he said.

Oroton lifted its net profit by 16 per cent to $8.3 million in 2013/14, aided by a sales recovery for its luxury own-brand handbags.

It has been focused in recent months on bedding down its franchise deal with US retailer GAP, and its Brooks Brothers joint venture.

Newly installed chief executive Mark Newman told shareholders at the meeting that GAP was trading well, with the new stores performing better than expected.

Brooks Brothers stores were trading in line with expectations, but there had been delays in launching an online store.

Oroton has 13 Brooks Brothers stores and plans to open another two this year.

It has six GAP stores, which lost money last year but the business is now expected to break even in fiscal 2015.

Meanwhile, Oroton is still in talks about launching the US clothing retail brand Banana Republic in Australia in early 2016.

Shares in Oroton dropped 17 cents, or 4.3 per cent, to $3.82.