Report: Oroton could cut ties with Gap
This comes after more than $11 million was wiped from Oroton’s market value on Wednesday as investors dumped shares in the retailer following a profit warning.
Oroton expects its sales slump to continue after sales revenue declined 11 per cent in the nine months to the end of April, compared to the same period a year ago.
It now expects 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 group expects Gap to contribute a $3.5 million loss for the full-year.
Citi analysts say the Gap joint venture has not been profitable and Oroton can exercise an option in February 2019 to end the tie-up by transferring its ownership of half of the joint venture back to GAP in the US.
“We think OrotonGroup will exit Gap brand in 2019,” the analysts report said.
Citi estimated an exit from Gap would cost Oroton about $6 million.
They also said Oroton had two other options: sell its brands to an overseas buyer wanting a foothold in Australia or to remove itself the ASX.
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.
Most Read Stories
Physical stores still on top, but consumers increasingly look online for late Xmas shop. https://t.co/YZ5RWF1JNR3 days ago