Shares in Oroton fell hard after the luxury retailer reported a continuing slide in sales in a “tough” retail environment.
At the close, they were down almost 20% to $1.085, a long way from the year high of $2.85.
In a trading update, Oroton says soft trading conditions resulted in a disappointing mid-season sale in April, an important trading month for the quarter.
“Challenging conditions experienced across the retail market in April 2017 with low consumer confidence and a competitive market, has meant the group’s April mid-season sales were below management’s expectations and reflected a further decline from that seen in the first half,” says interim CEO Ross Lane.
This follows half-year results announced in March which showed revenue down 10% to $67.1 million and net profit falling 52% to $1.8 million.
The company is forecasting underlying EBITDA (earnings before interest, taxes, depreciation, and amortisation) of $2 million to $3 million for the full year, a fall of up to $10 million in what Oroton calls a “tough retail environment”.
Underlying net profit after tax was $4.64 million in 2016, a 21.7% rise.
Investment bank Moelis & Company has been hired to help with a strategic review.
“The board acknowledges that the current level of profitability is unacceptable,” the company said.
Oroton describes the local clothing market as “aggressive”.
The retailer’s sales of the Gap brand have further deteriorated. The company is now forecasting a negative impact on underlying EBITDA of $3.5 million.
Its own Oroton brand is also suffering. Full year earning are now expected to be about $3 million lower than forecast.
The retailer has been working to re-establish its brand in the luxury end of the market, smartening up its stores and ending heavy discounting.
However, revenue was challenged by weak Boxing Day and New Year sales and there’s been little improvement since.
Last month Mark Newman stepped down after four years as CEO. Ross Lane, a director and major shareholder, is acting CEO.
Clothing retailers in Australia have been under pressure from emerging competitors online and general market conditions.
In February, fashion labels Marcs and David Lawrence went in to voluntary administration, the latest in a string of players going into administration, including Payless Shoes, Pumkin Patch, Howards Storage World and Dick Smith stores, which closed last year.
The post Christmas sales, including end of year and Boxing Day sales, have been disappointing. Myer, in its half year results, says sales were subdued during the stocktake due to widespread “discount fatigue” among consumers.