Oroton Profit Up but Warns of ‘Transition’ in 2014

Accessories retailer OrotonGroup is reviewing prices and marketing for the Oroton brand in the face of new competition from international brands, which crimped sales and margins in 2013.

Oroton cut the price of one of its key handbags from $595 to $495 this year to better compete with rivals such as Michael Kors and Marc Jacobs, which are setting up stand-alone stores and taking space in Myer and David Jones.

However, new managing director Mark Newman has ruled out price reductions across the board, saying he wants to maintain Oroton’s luxury market position.

“We are Australia’s only true luxury accessories brand,” Mr Newman told The Australian Financial Review. “With the arrival of new luxury retailers into the marketplace it’s easy to lose sight.”

“It’s important for the brand going forward that we continue to behave in a disciplined way in everything we do.”

Mr Newman, who took the helm last month from Sally Macdonald, says Oroton’s days of double-digit top-line sales and earnings growth are not over.

Total sales rose 0.8 per cent to $186.2 million and like-for-like sales rose 1 per cent, well below the 9 per cent growth achieved in 2012.

Net profit rose 10.2 per cent to $27.5 million but would have gone backwards if not for a one-off gain of $5.2 million as Oroton exited a 23-year licence agreement with Ralph Lauren.

“We hope to get back to those days, but we are operating in a different market, the landscape has changed, there’s definitely more competition around,” he said.

This year would be another of transition as Oroton looked for new partnerships, licence agreements and acquisitions to replace its Polo Ralph Lauren business, reinvested in the Oroton brand and launched its joint venture with US apparel brand Brooks Brothers.

Group earnings before interest and tax were expected to fall to between $16 million and $18 million – compared with $40.2 million in 2013 .

Group earnings before interest and tax were expected to fall to between $16 million...