Yet another couple of conflicting reports from the retailing sector yesterday.
Serial flop, Billabong (BBG) seeing its shares surge thanks to another leg in the story about which group of hedge funds will win control of the company.
And, at the same time, the only listed luxury retailer Oroton (ORL) reported a small rise in earnings for the latest financial year, thanks to the ending of a key retail partnership.
Of the two, the Oroton Group financial results were the more important because they show that a reasonably run business can make a profit despite the loss of a major part of the business – as Oroton did when it lost the exclusive hold it had on the US label, Ralph Lauren.
By way of contrast, Billabong, which is still a bigger retailer, has lost over a billion dollars, despite being a global brand, because management and the board failed to manage the business.
Oroton said net earnings rose 10.2% to $27.5 million for 2012-13, up from $24.9 million in the previous year.
That was on an 0.8% rise in topline sales to $186.2 million for the year, with comparable or like for like sales growing 1% for the 12 months.
But the result was boosted by a $5 million plus payment from the ending of the Ralph Lauren joint venture.
Without that, net profit would have been down to around $22 million, a fall of at least 10% for the year.
Earnings before interest and tax rose 6.3% to $40.2 million from $37.8 million.
That gave an ebit to sale margin of 21.6%, up from 20.5% as the company trimmed its cost of doing business. But the result was boosted by that one-off gain from the Ralph Lauren exit of $5.2 million.
ORL YTD – Oroton bags small profit boost
Oroton’s chief executive Mark Newman said in a statement that 2012-13 had been a "year of transition" for the brand, which saw the partnership with Ralph Lauren end as it went out on its own in Australia. To compensate, Oroton signed a new deal with another iconic American label, Brooks Brothers.
Mr Newman said sales were softer than expected in the second half of the year due to increased international competition and a weakening retail sector. (Other retailers found the same, from Myer, to Noni B, Specialty Fashion and David Jones).
But the company said solid performances from the group’s new Asian and online stores helped boost profits.
Looking ahead, Mr Newman said the launch of the Brooks Brothers joint venture and further growth in Australia and abroad were key priorities.
The group matched last year’s final dividend of 28c, fully franked, making an unchanged 50c a share for the year.
Looking to the current year, directors cautioned shareholders to expect a lower profit, saying "OrotonGroup EBIT after accounting for 100% of the group overhead costs, previously shared 50/50 with Ralph Lauren, would be expected to be in the range of ~$16-18M".
That warning explains why the shares fell 5.8% or 38c to $6.10 yesterday in a market that jumped by around 1%.
