Embattled luxury handbags retailer Oroton is looking at its options, including selling to new owner, after falling sales and the demise of its Gap stores pushed it to a full-year loss.
The iconic Australian accessories brand, founded 79 years ago, sank to a $14.3 million full-year loss in the year to July 29 compared to a $3.4 million profit the prior year.
This was largely due to a significant slump in sales during key trading periods at its Oroton and Gap stores and costs linked to its decision to end its tie-up with the US apparel brand.
All six of its Gap stores will close by the end of January.
Interim chief executive Ross Lane, the grandson of Oroton founder Boyd Lane, said he was disappointed with the result and the group was considering its options.
“The progression of the strategic review continues to be a key priority which may include a sale, refinancing of debt facilities or recapitalisation of the company,” he said in a statement to the ASX on Friday.
“While the group continues to engage with interested parties in the process, there is no certainty this process will result in a proposal or transaction for OrotonGroup.”
The group’s underlying earnings before interest, tax, depreciation, amortisation and impairment of $2.7 million for the year to July 29, was down from $12.9 million in the prior year, but in line with Oroton’s guidance given in May.
Revenue was down 9.7 per cent to $123 million compared to a year ago, partly due to an 11 per cent fall in its Gap stores’ sales.
While the Oroton brand’s stores had a 1.3 per cent lift in sales of its core categories, loss sales from categories it is shedding, including apparel, footwear and lingerie and reduced factory outlet sales weighed on the group’s revenue.
Mr Lane said the first eight weeks of the 2018 financial year had shown a lift in sales and profit margin compared to the 2017 financial year and Gap was trading in line with the group’s exit plan.
He said Oroton brand’s constant currency gross margin was above the prior year, which was a good sign given aggressive discounts in Oroton Factory Outlet stores.