Luxury accessories empire OrotonGroup has confirmed its lacklustre expectations for the first half of 2014, with net profit plunging 24 per cent.
The company, which lost the licence for the Ralph Lauren brand last year, reported a dip in net profit after tax from $6.7 million last year to $5.1 million this year. The figure represents a 24 per cent decrease in the company's bottom line.
Group earnings before tax and interest from continuing operations for the period also decreased to $8 million from $10.5 million in the previous corresponding period.
The figures are in line with guidance provided by OrotonGroup earlier this year.
Group revenue from continuing operations in the fiscal half year of 2014, however, increased 17 per cent to $62.7 million from $53.5 million last year.
Oroton like-for-like sale performance was up three per cent. This reflects an improved trend, compared to zero per cent in the first half of 2013 and minus eight per cent in the second half of 2013.
Commenting on the results, OrotonGroup CEO Mark Newman said the figures point to a period of significant transition for the group.
“HY14 was a period of significant transition for the group as we began our first year without the Ralph Lauren brand, commenced operating the GAP business in November 2013 and planned for the launch of Brooks Brothers in February 2014,” he said.
In addition to its first franchised store in Dubai, OrotonGroup also opened a further two new Oroton stores in Shanghai and Hong Kong, taking its Asian store portfolio to 10.
The company also launched its international Oroton.com website, allowing overseas customers to purchase in local currencies and has since seen online sales continue to stabilise. Online retail now represents 10 per cent of Oroton brand sales, according to the company.
Looking ahead, Newman said the group's outlook for the remainder of fiscal year 2014 remains cautious.
He said full year 2014 earnings before interest and tax and expected to come in at the lower end of OrotonGroup's previous guidance of $13-15 million.
“We expect the positive Oroton like for like sales trend to continue with a good response to the launch of the new autumn collection now in store and for gross margins to stabilise. We continue to carefully review our cost base and have made further reductions to our store and head office expenses with the benefits to be recognised in H2-14.
"We expect the GAP business to benefit from fresh inventory and supply chain efficiencies and we are confident about the successful launch of Brooks Brothers in Australia.
“As we look forward to FY15 and beyond our strategy continues to be focused on three key pillars. The continued innovation and increased investment in our Oroton brand, through upgrading our store environment, investment in multi-channel retailing, increased focus on customer experience,product innovation and international expansion; a successful launch of the Brooks Brothers brand; and the launch of the GAP brand here in Australia. We continue to have a strong balance sheet and cash flow position to support these initiatives and any possible acquisition or capital management initiatives.”