Luxury retailer OrotonGroup has posted a 20% lift in first-half profit and says it has a healthy foundation for future growth.
The sharp improvement is in contrast to the gloomy news coming from other companies in the same retail sector in offshore economies, such as Tiffany’s which reported a 76% slump in quarterly profit this week.
OrotonGroup’s shares rose sharply on the news, finishing up 41c, or 18.6%, to $2.70.
The clothing and accessories company said net profit was $12.5 million for the half year to January 24, compared with $10.4 million in the prior corresponding period.
That puts it on track to top the $16.7 million earned in 2008, which was up 76% from the previous year’s depressed results.
Revenue was up 11.4% to $74.36 million after being ahead 10% in the first few of months of the year when the AGM was held in early December.
It was a very different result to that reported overnight in the US by the larger luxury group, Tiffany’s.
Tiffany’s turned to Warren Buffett for $US250 million in financial help earlier this year: the 76% drop in quarterly earnings made that easier to understand.
Same store sales at US outlets open at least a year contracted by a third, more than in Europe or Asia, in the quarter and net profit fell to $US31.1 million, on revenues that dropped 20% in the quarter.
The company lowered its outlook and forecast an 11% fall in revenues over the rest of the year.
Tiffany had 206 stores and boutiques, worldwide including 76 in the US. One in New York is said to have been responsible for up to 10% of all sales.
But bankers, brokers and others have cut back on their purchases of trinkets and baubles, as have their trophy wives, partners and others who are no longer rich. Mortgage payments now rank higher than a trinket from Tiffany’s.
Against that result and similar ones from other upmarket retailers and supplier, the OrotonGroup performance was pretty solid.
It’s also a very different result from the small rises in profit and lower sales reported by Myer and especially David Jones.
Chief executive Sally Macdonald said the result was pleasing in what was considered to be the weakest economic climate for many years.
"Coupled with the structural changes that we have implemented over the past 24 months, and our focused strategy of being leaders within our competitive segments, we have a healthy foundation for the future," she said in a statement to the ASX.
A cost reduction program announced in fiscal 2007 had helped drive expenses down to 47% of sales in the first half, from 50.3% of sales at the same time last year.
OrotonGroup increased its interim dividend to 16c fully franked, from 15c in the first half of 2008.
"The increased interim dividend reflects the strength of the company’s position today with minimal bank debt, strong cash flow generation and a healthy balance sheet," the company said in yesterday’s statement.
Like-for-like sales for the group rose 12%, compared to growth of 14% in first half of 2008, with like for like sales for the Oroton brand up 20% and Polo Ralph Lauren sales 5% higher.
"Our like for like results demonstrate the strength of our assets as well as our ability to navigate through volatile trading conditions," Ms Macdonald said.
Group earnings before interest and tax was $18 million, up 17.8%, as the EBIT margin improved to 24.5% of sales from 23.3%.
The group opened ten new stores and closed two stores in the half, taking the total number of stores from 59 to 67. More are being opened this half.
