OrotonGroup dumped after earnings sliced

The fashion group's shares have been dumped as it foreshadows an earnings slump.

OrotonGroup (ORL) suffered its worst fall in 10 months after it warned that the current year’s earnings will plunge by nearly half due to the loss of the Ralph Lauren contract and a tough discretionary spending environment.

The luxury fashion accessories retailer is tipping 2013-14 earnings before interest and tax (EBIT) to range between $23 million to $25 million if it can get a similar contract to replace Ralph Lauren. Otherwise, EBIT can fall to as low as $16 million to $18 million. The consensus forecast on Bloomberg for 2013-14 is $26 million.

The group’s license agreement with Ralph Lauren expired on June 30 this year and sales of the label makes up a greater proportion of overall profits in 2012-13 than it did the year before.

However, OrotonGroup says it is confident that it will be able to clinch new promising opportunities over the next three to six months and will open new stores in China, Hong Kong and Dubai before the end of this calendar year.

The potential disappointing news was flagged in yesterday’s article Small cap prophets: A profit season guide.

The stock is down 5.9% at $6.89 in morning trade.

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