OrotonGroup (ORL) was the second niche retailer to reveal a solid set of figures yesterday (the other was Premier Investments) and the third this week (Kathmandu on Monday), showing that at least one part of retail is doing well.
But the detailed figures did show a second half slowdown in sales for Oroton in its key store group, and a small loss of the six months to June 30.
Net profit for the year jumped by more than 31% to $3.5 million, thanks to a recovery in sales of its core brand, Oroton handbags.
Ororton said group sales rose 3.3% to $136.4 million in the year to July, and would have been higher if not for the closure of eight Oroton stores in Australia and seven overseas.
Same-store sales rose 2%, with Oroton brand sales rising 1% for the year after growing 11% in the first half and falling 6% the previous year. At GAP, same-store sales rose 6%.
Oroton increased its final dividend by 1 cent (50%) to 3 cents a share, payable October 26, taking the full year payout to 9 cents, up from 6.5 cents for 2014-15.
The company is pursuing a two-tier growth strategy – selling expensive Oroton handbags and accessories to upper-income shoppers and everyday clothing and footwear under the mid-market GAP brand (which replaced Brooks Brothers which didn’t work and the long association with Ralph Lauren).
The result for the 53 weeks to July 30 followed a 73% jump in first-half net profit to $3.8 million, indicating the company made a small bottom-line loss in the second half.
Underlying net profit, excluding store write-downs of $1.6 million in 2016 and losses from exiting the Brooks Brothers joint venture in 2015, rose 22% to $4.6 million as cost savings offset slightly weaker gross margins.
While the underlying result fell slightly short of analyst forecasts around $5.3 million, it was much improved on 2014-15, when profits plunged 68% as the company moved away from heavy discounting, took losses on ending the Brooks Brothers joint venture and opened new GAP stores.
"As we concluded the second year of transformational change, it is pleasing to see the Group return to a period of stability and growth in earnings, with a 31% improvement in net profit after tax.
"We built on the underlying EBIT growth of 8% reported in the first half, and achieved a 15% growth in underlying EBIT for the full year., according to CEO, Mark Newman.
"Our focus on the continued repositioning and development of the core Oroton brand remained our priority, along with further improvement in the international channel and accelerating the trading performance of the Gap brand,” he added.
Oroton shares ended flat at $2.30.
