Oroton loses licence for Ralph Lauren but gains a “cash bucket” of $30 million

Oroton has lost its exclusive licence agreement with Ralph Lauren, which will expire on June 30, 2013, and will be paid around $30 million for inventory and store assets by Ralph Lauren.

The loss of the licence is a huge blow to Oroton as Ralph Lauren currently represents 45% of the group’s sales.

Chairman Ross Lane said Oroton was “disappointed” to be ending its 23-year partnership with the American luxury brand.

“However, we are pleased to be in a position to accelerate the expansion of the Oroton brand in Asia and potentially pursue other opportunities including capital management,” he said.

OrotonGroup chief executive Sally Macdonald also tried to put a positive spin on the news, saying that the capital released from the Ralph Lauren group would be used to support Oroton’s expansion into Asia.

Oroton has seven stores in Singapore and Malaysia trading today and expects to open its first stores in Shanghai and Hong Kong in 2013.

“It also provides OrotonGroup with the opportunity to consider complementary acquisitions of owned and licenced brands that under the Ralph Lauren contract we were precluded from pursuing,” Macdonald says.

Ralph Lauren Corporation will take over the operation of the Ralph Lauren business in Australia and will pay Oroton around $30 million for inventory and store assets.

Ralph Lauren has said it will provide for the employment of the Ralph Lauren retail store team members and for transitioning of lease arrangements at the end of June 2013.

David Gordon, partner in charge of the national retail advisory practice at WHK, told SmartCompany Oroton will need to replace Ralph Lauren in one form or another.

“That replacement could be through finding another overseas brand or picking up one, if not more, local fashion brands and the good thing is that Oroton has the capability and track record of being able to grow a brand,” he says.

“They have got a $30 million cash bucket to replace Ralph Lauren, so it is not all doom and gloom, as you would think there are a number of similar profiled brands in Australia potentially looking for a home.

Gordon says there is no question the loss of the licence is a blow for Oroton but there is also opportunity for the retailer.

“It does provide Oroton with an opportunity to acquire a brand where the IP becomes theirs as opposed to just being the licencee so they don’t get into this situation again,” he says.