Oroton shares are tanking as the luxury goods group sends out a profit warning

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Oroton, which also has Gap and Brooks Brothers brands in Australia, has cut its earnings outlook after it ended heavy discounting.

The luxury goods company has been hit by lower sales after it reduced discounting in the Oroton brand and invested in startup costs in Brooks Brothers and the opening of new GAP stores.

CEO Mark Newman says significant headway has been made in re-establishing Oroton as a true Australian luxury brand.

“Both the Gap and Brooks Brothers brands achieved lower sales and margins than forecast and consequently contributed a higher loss than the prior corresponding period in the quarter,” he says.

Oroton now expects earnings to be about $4.5 million, compared to last year’s EBIT of $13.3 million.

“Clearly this is a disappointing result for the group,” Newman says.

However, he is confident the company will in financial year 2016, begin to move back into growth for the Oroton brand.

And the company expects reduced losses in the Gap brand with the opening of the three new stores.

“We have also recently started discussions with Brooks Brothers USA on how best to manage the Brooks Brothers brand in Australia in the future,” he says.

In March, Oroton posted a 57% drop in profit to $2.2 million for the first half.

Oroton shares are down 25% to $1.92.

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