Published: August 16, 2012 - 5:30PM
Shares of fashion brand Oroton Group are likely to face hefty losses when trading recommences tomorrow morning after the company said it lost the licence to exclusively distribute Ralph Lauren in Australasia as of June 30 next year.
The company, one of the few performers among Australia’s listed retail stocks, said Ralph Lauren currently accounted for 45 per cent of group sales and 35 per cent of net profits.
‘‘After over 23 years developing the Ralph Lauren brand in Australia and New Zealand we are disappointed to be ending our business partnership,’’ said Oroton chairman Ross Lane in a statement published after the close of the market this afternoon.
‘‘However, we are pleased to be in a position to accelerate the expansion of the Oroton brand in Asia and potentially to pursue other opportunities including capital management.’’
The company said the business would be transferred to Ralph Lauren corporate next year with the global brand required to pay Oroton for certain inventory and store assets currently valued at $30 million.
Chief executive Sally Macdonald underlined the opportunities in Asia the company can pursue with the freed up capital, as well as ‘‘the opportunity to consider complementary acquisitions of owned and licensed brands that under the (Ralph Lauren) contract we were precluded from pursuing’’.
The company is expected to open new stores in Hong Kong and Shanghai next year and has seven stores trading in Malaysia and Singapore.
Oroton warned that, on top of the loss of earnings, the Ralph Lauren business soaks up 35 per cent of corporate overhead expenses for the group and said next year’s results will reflect one-off costs associated with the transition.
Oroton said its 2012 financial year results will be announced on September 20 and are not expected to be materially affected by this announcement.
Like-for-like sales increased 9 per cent, and the company’s net profit ‘‘is expected to approximate’’ last years $24.8 million result.
Oroton shares closed 0.5 per cent higher at $7.74 today and are up 2 per cent since the start of the year, outperforming many other stocks in the consumer discretionary sector.