Oroton's decision to reign in heavy discounting has hurt sales and sent its share price to a six year low.
The luxury retailer has downgraded its earnings growth expectations, expecting a 66 per cent slide on last year.
Oroton expected earnings to be higher than fiscal 2014 but saw earnings plunge by more than $2 million in the third quarter.
Oroton CEO Mark Newman said a strategy to reposition the Oroton brand is still gaining traction.
“Our strategy to elevate our core Oroton brand, in particular to bring a halt to the heavy clearance activity and Friends & Family type sales that the brand had become reliant on, has cost more than expected, despite achieving our plans to grow margin and higher average selling prices in our full priced stores.
“We have made significant headway in re-establishing Oroton as a true Australian luxury brand, with a new, elevated store concept, limited edition products, focus on ‘clienteling’, an increase in average transaction value and endorsement as a luxury brand in the press.
“Importantly, however, we still have until the end of this year before we complete the cycle of the very heavy discounting from FY14 and move into a more comparable sales and earnings period. “
The third quarter and April in particular, reflects how much the heavy discounting from previous years has eroded the brands’ prestige.
The market has remained uncertain and the timing of Easter and ANZAC Day this year compared to last year also impacted sales.
“Both the Gap and Brooks Brothers brands achieved lower sales and margin than forecast and consequently contributed a higher loss than the prior corresponding period in the quarter."
Oroton now expects underlying group earnings before interest and tax to be approximately $4.5 million compared to last year’s figure of $13.3 million.
The group said the over $3 million of the decline is due to a significantly weaker Australian dollar, despite its conservative hedging policy.
“Clearly this is a disappointing result for the Group, but we are confident that as we move into FY16, with the benefits of a less discounted promotion plan, continued roll out of the new store concept, new product ranges, a new point of sale system and enhanced CRM capabilities, we will begin to move back into a growth phase for the Oroton brand.
“We have also recently started discussions with Brooks Brothers USA on how best to manage the Brook s Brothers brand in Australia in the future."