Oroton share price crashes to 20-year low

Oroton expects full-year pre-tax earnings to fall by as much as $10m for 2017, its second downgrade in five months.

Actor Rose Byrne models for Oroton, which has issued a profit warning.

The market for $1500 handbags and $900 limited-edition clutches is not what it used to be, with collapsing sales since Christmas forcing up-market fashion brand Oroton to issue its second profit warning this year, sending its share price crashing to 20-year lows.

Oroton shocked investors with news that it expected its full-year pre-tax earnings to fall by as much as $10 million to $2m-$3m for 2017, marking its second downgrade in five months.

The fashion brand’s evaporating profit has triggered a strategic review to be led by investment bank Moelis & Co that could lead to major shareholders, the Lane family, buying out minority investors and privatising the retail chain.

Oroton’s woes come at a tough time for the nation’s $300 billion retail sector, which has seen a string of collapses since Christmas, with chains such as Payless Shoes, Pumpkin Patch and Marcs failing, while listed retailers such as The Reject Shop, Adairs and footwear company RCG have issued profit warnings.

Those struggles, combined with successive falls in ABS retail trade figures for the past two months, have led many analysts to label the sector as suffering from recessionary conditions, as chains face intense competition, aggressive discounting and dwindling margins. Emerging from a two-day trading halt, Oroton confirmed the worst fears of shareholders that soft trading conditions for the key mid-season sale in April had continued to decline and would affect half-year results. The shares, which traded as high as $2.69 in November, closed down nearly 20 per cent at $1.085

The company, known for its stylish handbags and accessories, said sales for the half year were down 10 per cent while EBITDA was down $3.9m, or 44 per cent on the previous corresponding period. Year-to-date sales were down 11 per cent. The company’s GAP stores had suffered a further slump and were expected to post a loss of $3.5m for the year.

“Poor and competitive market conditions during the April mid-season sale are expected to continue during the more important end-of-season sale of June-July and will further adversely impact financial performance during the remainder of 2017,” interim chief executive Ross Lane said. “The board acknowledges that the level of profitability is unacceptable.”

Mr Lane took on the top role after the sudden exit recently of Oroton’s chief of four years, Mark Newman. “Since commencing as interim CEO, my team and I are very ­focused on improving the overall business performance of the group,” Mr Lane said.

“We have engaged Moelis & Co to assist in conducting a strategic review.”

Ophir Asset Management’s Andrew Mitchell said the retail sector was doing it tough. “There is a lot of pain in retail at the moment,” he said. “The Aussie consumer just doesn’t want to pull their wallet from their pocket.

“It is not surprising higher-end retailers like Oroton are feeling the pain, too. We think there are structural and cyclic headwinds hitting the consumer.

“Retailers are being hit by a double whammy — Aussie consumers don’t want to spend at the moment and, when they do, they are increasingly going online.’’