The Motley Fool

Oroton CEO packs her bags

OrotonGroup’s (ASX:ORL) esteemed CEO, Sally MacDonald, has stepped down from the fashion retailer after seven years at the company.

Mark Newman has been appointed the new CEO, from within Oroton, and will take over the reins from Ms MacDonald, after a brief transition period.

The news comes as the luxury handbag, clothing and accessories maker announced that it had signed a deal with iconic American brand Brooks Brothers to develop the Brooks Brothers brand in Australia & New Zealand. The first 4-8 stores and/or department store concessions are expected to open at the beginning of 2014, with further stores and local online store to follow soon after. Oroton says the existing Brooks Brothers online business to Australia is currently trading at over $1 million in sales per year, with no local store presence.

The deal with Brooks Brothers was announced as Oroton ends its long association with Ralph Lauren. Despite the sun setting on the Ralph Lauren deal, Oroton still expects strong results for the 2013 financial year, with earnings before interest and tax (EBIT) forecast to be around $40 million.

Looking out to 2014, the company announced that trading in the Oroton brand in the second half of the year was softer than expected, in what continues to be a challenging and discounted retail market. OrotonGroup has forecast EBIT to fall dramatically in the 2014 financial year to between $23-$25 million. Expect to see similar announcements on the tough retail conditions from retailers Premier Investments (ASX:PMV), Specialty Fashion Group (ASX:SFH) and RCG Corporation (ASX:RCG) when they report.

On the positive side, Oroton announced that its first Oroton brand store will open in Shanghai by September 2013, with a further two new stores in Hong Kong and Dubai to follow before Christmas this year.

Foolish takeaway

With a new joint venture with Brooks Brothers, new store openings and a falling Australian dollar, all Oroton needs now is for Australian consumers to start spending again to see profits resume decent growth. Forecast to pay a 50 cent dividend this financial year puts the stock on a 7% plus dividend yield, before including franking credits.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned.

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