Luxury handbag and accessories retailer Oroton has suffered a huge hit to its full year profit as it transitions away from heavy discounting and expands the GAP clothing brand.
Oroton's profit for the 12 months to July 25 tumbled 68 per cent to $2.6 million, from $8.3 million a year earlier.
The retailer's underlying profit, which strips out one-off costs, fell to $3.8 million from $9.1 million.
Chief executive Mark Newman says the drop in earnings was partly due to the retailer reining in heavy discounts on its Oroton range.
"Fiscal 2015 was a challenging year with the results reflecting the short term effects of repositioning our core Oroton brand to a true affordable luxury positioning," he said in a statement on Thursday.
He said the expansion of the GAP brand and a full year of losses from the now exited Brooks Brothers Australia joint venture also contributed to the weak result.
The group plans to improve profitability after cycling off a full year of the effects of discounting and early start up costs for the new GAP stores and closed some loss-making international stores, he added.
Mr Newman said the ongoing rollout of Oroton's new store concept, more top-end products, limited editions and new categories such as fine jewellery and watches formed part of the group's strategy to return to profit.
He said sales in the first weeks of 2015/16 have been encouraging with like-for-like sales rising eight per cent.
OROTON'S MOVES AWAY FROM DISCOUNTING WEIGHS ON PROFIT
* Full year net profit of $2.62m, down 68.3 pct
* Revenue of $132m, up 5.7 pct
* Fully franked final dividend of 6.5 cents, down from eight cents