Oroton stands out in annual retail industry health check

Internet Retailing

21st Dec 2016

In its annual health check of the Australian retail industry, global accounting association BDO identified luxury fashion and accessories company OrotonGroup as a standout performer in the online space.

While most Australian retailers still trail their international counterparts in online sales as a percentage of overall sales, OrotonGroup achieved 12 per cent of its total revenue through online sales. This represents an increase in relative terms of more than 50 per cent from FY15.

“Oroton is a great example of a retailer striking the right balance between connecting with their clientele via digital mediums, whilst still providing a consistent personalised and emotive consumer experience,” BDO partner and retail specialist John Bresolin said.

According to Bresolin, many Australian luxury retailers struggle to enforce a successful omnichannel presence, but Mark Newman, CEO of Oroton, said the company has the advantage of experience on its side. The retailer has been selling online for nearly 10 years.

“Our main focus now is on delivering the best service levels we can, from landing page experience to the delivery of the product,”  he said.

“Our customers have told us that they want to be able to interact with our brand both on and offline so it is important that we allow them to do that and deliver that experience in the best possible way we can,” he said.

“As such, Oroton is heavily focused on enhancing the customer experience, both online and in-store.”

BDO’s 2016 Spend Trend report provides an annual health check for Australia’s retail sector by analysing key 2015-16 financial ratios and indicators for 18 ASX listed retailers, including both Wesfarmers and Woolworths, as well as 13 US and UK retailers including Target and Macy’s.

Bresolin said this year’s report saw some promising results, with Australian specialty retailers closing the gap on their bigger international counterparts.

“Australian specialty retailers were the stand-out performers this year, with increases in both revenue and gross margins. Sales revenue saw a significant rise of 8.5 per cent for FY16, an increase of 3.4 per cent on the previous year,” Bresolin said.

Overall, retail sales showed further uplift in FY16, despite some high-profile losses. While results for many ASX listed retailers varied, overall sales revenue, net profit margin, gross margin and gearing have improved or remained stable, in the face of uncertain economic conditions and increased competition from large international retailers.

Key findings from BDO’s 2016 Spend Trend report:

• Australian specialty retailers recorded an average net profit margin increase of 4.3 per cent in FY16. Conversely, international retailers saw a fall of 7.8 per cent in net profit margin from FY15.
• Gross margins have remained fairly stable, with the national retailers recording a slight increase of 2.9 per cent in FY16. Australian specialty retailers’ revenue growth was marginally reflected in the gross margins which saw a 0.6 per cent increase. Meanwhile, international retailers saw a decrease of 0.9 per cent.
• Overall, salaries, rent and marketing expenses as a percentage of sales have decreased, largely due to cost-cutting strategies including cheaper marketing channels and a focus on omnichannel distribution.
• The amount of time retailers are taking to pay their creditors is reducing on both sides of the world. Creditors are being paid in 61.2 days on average in Australia, in contrast to 51 days for international retailers.
• Stock turnover for Australian retailers has improved, increasing 3.0 per cent to 53.5 days in FY16 whilst international retailers have experienced a marginal slowdown of 5.2 per cent to 47.5 days.
• Australian retailers continue to be significantly less geared than their international counterparts, up to 2.5 times less.