Assignment #1: My company revealed as OrotonGroup

 

Late last week I was delighted to find out the company that I’ll be working with this semester is OrotonGroup. Sweet, I love Oroton. The in-store at David Jones in Perth’s CBD is right next to the Marc Jacobs section and I’ve managed to pick up a couple of great Oroton pieces over the years. One of them is this amazing silky feeling, black, mini length trench coat with shiny gun metal grey coloured buttons (pic in the blog thumbnail). It’s delightful but alas in storage now, due to my recent move to steamy hot and tropical north Queensland and all. But I digress.

It seems being an Australian-attainable-luxury-brand is a tough gig these days. Oroton went through some pretty shiny golden year’s where, according Webb (2015) writing for the SMH, “was a wonderful stock market performer between 2006 and 2011, improving from under $2 to $9.50 or thereabouts”.  When this sort of increase happens people get interested; real interested in what you’re doing, and how you got there, and where you’re going from here. Watch this clip of then OrotonGroup CEO Sally MacDonald being co-interviewed by Roger Montgomery and Peter Switzer in 2010 for the Sky Business Channel.

In the video, Sally touched on some of the strategies she had implemented to improve the company’s performance. In summary:

  • Listening to the consumer and management getting inside the stores more often to see what was going on
  • Reinvigorating the brand and creating new products
  • Leveraging Oroton’s Australian identity and fostering the brand’s authenticity/relevance to domestic markets
  • Reducing costs by outsourcing and cutting back the workforce
  • Create positive changes to the culture of the firm and recruit a really good team

I’ll revisit this in a little more detail in my next blog post when I summarise OrotonGroup’s 2013 – 2015 annual reports. It seems that two of the strategies Sally saw a need to implement in 2010 are actually very similar to the strategic objectives for Oroton as stated in the 2015 annual report. Importantly the current share price (as of the time I’m writing this article) is $2.61 (Australian Stock Exhange, 2016) which represents a considerable decrease from the shiny, golden glory days of the late noughties.

If you didn’t get a chance to watch the Youtube, you’re in luck because I’ve summarised the most interesting bits!

The best quote was clearly from Sally “You can’t kill Oroton either, you just shine it up” [makes out like she’s Aladdin trying to get the Genie to come out]. Gold. However my favourite part was one of the interview’s predictions (BTW, this is an approximate transcript):

Interviewer guy 1:  Sally is one of the future retailing legends of this country, if she wants to be. You know, she is a rising star now, and to give you some sense of [it], retailing is a business where there is no barriers to entry. People can open up a shop next door and sell purses and handbags. So to get the sort of returns on the equity that Sally’s achieving now which is [sort of] 80% returns on equity. In retailing that is unbelievable.

You shouldn’t take you cues from share prices, you should think about value. The value of this business for whatever reason – it’s partly Sally and her team  [more about Sally’s positive influence]…

Interviewer guy 2: How’s your health Sally?

Everyone is giggling – HILLARIOUS

Interview guy 1:  I think the risk is not Sally’s health, it’s the risk someone comes along and say “Sally we’re going to pay you 10 times a much to run something else”…

Interestingly, Sally left Oroton in 2013 after a sharp slump in earnings following the loss of Oroton’s 23-year distribution licence with Polo Ralph Lauren, as reported by Sue Mitchell (2015) for the AFR.

Fast forward to late 2015 and boom! Sue Mitchell (2016) reporting for the AFR also reveals “Woolworths has tapped Sally Macdonald, the woman who saved upmarket retailer Oroton Group from almost certain collapse, as chief executive of its struggling discount department store chain BIG W”.

The next chapter in Sally’s story begins.

So after another slight deviation – here is an important and interesting element of my company OrotonGroup. Oroton is only one brand (the mainstay brand) of the OrotonGroup. The Group’s “underlying strategy is to design, procure and distribute premium owned or licenced brands products through retail and wholesale channels with the objective of driving growth in sales and profit” (OrotonGroup, 2015) In OrotonGroup’s case, this is typically characterised in licencing international brands and launching them in Australia.

Enter Ralph Lauren, Brooks Brothers, and Gap..

Stay tuned for my next blog post on OrotonGroup where I’ll have a look at each of the annual reports and we’ll see what impact the guys (Ralph, Brook, & Gap) if any, have on the firm’s performance between the years 2013 – 2015.

________________

Australian Securities Exchange. (2016). Shares – Detailed search. Retrieved from http://www.asx.com.au

Webb, C. (2015, March 28). OrotonGroup boardroom comes out to buy. Retrieved from http://www.smh.com.au

Mitchell, S. (2015, March 28). Woolworths CEO Sally Macdonald to turn around Big W. Retrieved from http://www.afr.com

OrotonGroup. (2015). 2015 Annual Report. Retrieved from http://www.orotongroup.com.au

________________

If anyone from Oroton marketing reads this – it seems no one I’ve spoke to in Mackay has heard of your brand – or at most I get a vague nod of recognition after I tell them you’re in the business of nice bags. And, I’ve been Googling your company a lot and I haven’t had any ads pop up in Facebook, Twitter, or remarketing on Google…just saying. I wouldn’t bring it up however your share price is at $2.61..(i)

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25 comments

  1. Hi Amy. Oroton is in a similar business as my company, Noni B. They seem to have followed fairly parallel paths over the last couple of years. However, Oroton seemed better situated to absorb a loss and have diversified their business. I would imagine that such luxury items are some of the first to notice a decline when things get tough.

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    • Hi Sue,

      Yes you’re right. Seems its been a tough gig in retail over the past couple of years. It’s especially hard for luxury bands when there is a downturn in the retail market because discounting product risks diluting the brand’s value proposition.

      Noni B would have lot of competition from department stores like Target and Kmart too who sell in this price range and benefit from much larger marketing initiatives.

      I think Oroton’s ability as a luxury brand to go out into the international market to find new customers – China and UAE especially – has been really beneficial in ensuring they are able to overcome a decline in confidence effecting the Australian retail market.

      I noticed Noni B had a write down in goodwill in 2013 which severely effected their share price, hitting an 18 month low. Was there a considerable decrease in their cash assets too? I would imagine their sales income is derived from high volume/low margin sales. So I would imagine a decline in sales, coupled with heavy discounting would result in very low sales income.

      I guess this is an advantage of luxury brands – particularly accessories – lower sales volume/higher margins, which means there is a bit of resilience in their margins – however at a risk of diluting the value proposition. So there is always going to be a win/lose scenario..something has to give.

      http://www.theage.com.au/business/noni-b-facing-fullyear-loss-after-goodwill-writedown-20130625-2ov6r.html

      A.

      Liked by 1 person

  2. Absolutely LOVE your blog and write up about your company…. the wonderful Oroton!! You rockstar. I must admit I would be all over this assignment and probably done and dusted if my company was one of personal interest. I will be adding you to my top 3 🙂

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  3. Hi Amy,
    Such a great first post about your company, I will admit at first I had no clue who they were or what they even did. But now that I have read this I now have a basic understanding of the company you have been given, great work!!
    And yes I do agree they make some quality products! If only they were closer to me ahah 🙂

    Liked by 1 person

  4. Very interesting to read your take on your company and I must admit, I’ve never heard of Oroton either.. Though they do seem to be afloat on the raft of flailing retail companies that have hit a massive slump too. Turns out the mining down turn hasn’t just affected the miners.

    Liked by 1 person

    • I guess it’s because Oroton always had a presence at Myer and DJ’s in the CBD, which is where I worked and shopped since the early 2000’s so they always had a presence in these retailers. And I always see ads in the front of the Qantas mag too but since moving to Mackay there hasn’t been much effort by higher end brands to market themselves. Maybe they only stick to a few select department stores and high streets. I can see why, from the Deloitte’s take on the 2014 economic conditions for retail – consumer confidence can really be effected by interest rate announcements, reduction in price of major exports like iron-ore, and budget hand downs. And not to mention companies like Target and Kmart responding a lot more to designer trends now (particularly furniture/accessories). I saw Eames chair replicas in Target the other day. What the? So actually you can get contemporary good design at totally low price if you want to.

      Like

  5. I like your blog, you did really great job for your assignment, your company Oroton group is a such successful company on au, and you made your assignment fun and easy to follow with the video. I like your blog and quite enjoy to read

    Liked by 1 person

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