Struggling handbag retailer Oroton has warned its full year underlying earnings will fall as much as 85 per cent because of an ongoing sales slump.
Oroton sees no end to the slide in its sales, which in the nine months to April were down 11 per cent on the same period a year ago.
It expects its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to fall to between $2 million to $3 million in 2016/17, from the prior year’s $12.9 million.
The drastic downgrade caused Oroton shares to hit an 18-year low of $1.00 in early trade, and they ended the day down 19.6 per cent at $1.085, wiping more than $11 million from the company’s market value.
Ross Lane, who has been interim chief executive for just over four weeks, says competitive conditions experienced during the April mid-season sale are expected to continue into the more important end-of-season sales in June and July.
“Given the recent retail market trends of poor April mid-season and January summer sales, and low consumer confidence, management consider it prudent to reassess the outlook for the full financial year,” he said in a statement.
The significant downgrade to the earnings forecast reflects an expectation of lower sales, a fall in the hedge buying rate due to foreign currency movements, and increased losses from Oroton’s apparel chain GAP.
The company’s shift away from women’s apparel, shoes and lingerie, and lower sales at its factory outlets, are also having a larger impact than expected.
High-end fashion in particular appears to have come under pressure from weak consumer spending and low wages growth, with Myer recently saying luxury women’s label Sass & Bide accounted for $1.5 billion of its fall in sales in the three months to April 29.
Myer also recently rescued Marcs and David Lawrence, buying the premium labels after their parent company fell into voluntary administration in February.
Mr Lane, the grandson of Oroton’s founder, was appointed in April when chief executive Mark Newman resigned after four years in charge.
Oroton will release its full year financial results on September 21.