• H1 net profit falls 23.8%
  • Margins tighten to 63.6%
  • Sales climb 17%

Australian company Oroton Group has issued a cautious outlook for the remainder of the year as earnings fell in the first half on the back of one-off costs and a tightening of margins.

In the six months to the end of January, net profit fell 23.8% to AUD5.1m (US$4.6m) from AUD6.7m a year earlier.

Oroton said a tightening of margins, as well as start up costs associated with investments made in the GAP and Brooks Brothers businesses, new stores in Shanghai and Hong Kong, and one-off restructuring costs, impacted earnings.

Gross margin was impacted by Oroton's decision to reduce its retail prices towards the end of fiscal 2013 plus changes to both its channel and product mix. The introduction of the lower margin/higher volume Gap brand to its business also had an impact. Net margin narrowed to 63.6% from 68.3% last year.

Sales, however, climbed 17% to AUD62.7m, while like-for-like sales were up 3% despite the continuing discounted market.

CEO Mark Newman said the first half was "a period of significant transition" for the group as it began its first year without the Ralph Lauren brand, commenced operating the GAP business in November last year and planned for the launch of Brooks Brothers in February.

However, he added: "Our outlook for the remainder of FY14 is cautious. We continue to carefully review our cost base and have made further reductions to our store and head office expenses with the benefits to be recognised in H2-14. Accordingly, we continue to expect FY14 EBIT to come in at the lower end of our previous guidance of $13-15m."