Luxury accessories empire OrotonGroup has revealed it is braced for a dip in earnings.
The company has advised that group earnings before interest and tax (EBIT) for the first half of 2014 is expected to be approximately $8 million, compared to a continuing business EBIT from the prior year of $10.5 million.
Continuing business excludes the effect of the Ralph Lauren business that was discontinued with the expiry of the licence on June 30, 2013.
According to OrotonGroup, the decrease in EBIT can be attributed to the start-up and early trading costs associated with the investments made in the new Gap and Brooks Brothers businesses and new Oroton stores in Shanghai and Hong Kong.
The company said these costs, together with “certain other one-off costs associated with the departure of the previous CEO”, have made an impact on the business which will be apparent in its financial statements for the period.
However, OrotonGroup said it expects comparable Like-For-Like store sales growth of +3 per cent for the first half vs. the prior corresponding period.
The company described these results as a “a positive result” which reflected an improved trend compared to the -4 per cent for the 2013 financial year and the -8 per cent in the second half of that year.
These, however, were achieved at similar promotional and discounting activity to last year in a continuing discounted market particularly over the peak Christmas and New Year trading period.
Gross margin was also impacted by the strategic decision to reduce retail prices towards the end of fiscal 2013 and changes to both channel and product mix.
The company also confirmed its previous guidance for full year 2014 EBIT of $13 million-$15 million and based on current trends said it expects it to be at the lower end of that range.
EBIT for the second half of the financial year is expected to be positively impacted by lower store and head office expenses than the prior year in addition to a better trading performance in line with the first half trend.