Profits have tanked at Oroton, dragged down by weak post-Christmas sales

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Another fashion retailer has seen its profits eaten away by disastrous post-Christmas sales.

OrotonGroup’s half year revenue fell 10% to $67.1 million mainly due to fewer discounts, lower factory outlet sales in Oroton and a decrease in GAP sales.

Like-for-like sales for the luxury retailer, excluding discontinued categories, were down 8%.

Profit was down 52% to $1.8 million and the company decided not to declare a dividend.

A short time ago, Oroton shares were down 5.7% to $1.48.

“Clearly this is a very disappointing first half result for the Group,” says CEO Mark Newman.

“Positive trade in the second quarter up to Christmas Day was outweighed by sluggish sales in the first quarter and the much publicised, highly discounted and soft retail market from Boxing Day onwards.”

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 sale caused by widespread discount fatigue among consumers.

The Oroton results were inline with a profit warning issued in January, which sent the company’s shares down 20%.

Like-for-like sales at GAP stores were 12% lower in a highly discounted clothing market, a cold Spring and a womens’ range that didn’t perform globally.

Oroton brand like-for-like sales were down 11%, with lower factory outlet and discontinued categories sales outweighing improvements in full price, concession and international stores.

The company says the trend to increased traffic to its online store and lower traffic to physical stores continues.

Sales via the online store now represent 12% of sales.

“We continue to prioritise and invest in this store and had a complete relaunch, in early February, with enhanced navigation, product pages, checkout and delivery options,” he says.

“As our business continues to evolve, our strategy has been to monitor and plan our physical store network and either upgrade to the new concept or close marginal stores to reduce the network size to meet our customers needs.”

The company also announced a strategic investment of 30% in a fast growing, online lifestyle accessories business, The Daily Edited, for $4.5 million.

Newman says sales have improved over the past seven weeks.

Sales in the GAP brand have also improved in the last few weeks as the weather cools.

“Whilst we remain cautious about the overall market, our focus for the remainder of the year is on continuing to grow the core Oroton first retail business, rejuvenating and balancing the important Factory Outlet business contribution, re-setting the GAP brand and providing a strong support platform for The Daily Edited to enable it to continue on its strong growth trajectory,” says Newman.

The half year results by the numbers:

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