Luxury brand retailer OrotonGroup Limited (ASX: ORL) has dropped around 20% in trade today after warning investors that first half financial year 2015 earnings would be lower than the corresponding period last year.
The group spent the first half of this financial year aiming to reduce discounting in order to maintain the all-important margins but that strategy appears to have fallen flat in the face of soft consumer confidence.
The failure to sell its range of designer handbags, leather goods and flashy accessories at sufficiently high prices also reflects the fact that consumers across Australia have tightened their belts as real wage growth hits a wall.
Oroton joins a long list of retailers including Kathmandu Holdings Ltd (ASX: KMD) and Myer Holdings Ltd (ASX: MYR) in delivering disappointing sales figures to the market recently.
The group said it had taken on substantial costs in starting up its Brooks Brothers menswear business, while The Gap brand also performed disappointingly compared to the prior corresponding period.
The good news is that the group expects to return to modest earnings growth in the second half of this financial year, although that's a long way off yet. Overall, the business looks to remain one of the better retailers on the ASX and may be an opportunity for bargain-hunting investors.
