It helps if you and your family control a company with more than 50%of the issued capital — that’s the reality at OrotonGroup, Australia’s only home-grown luxury goods maker and retailer.
It means you can be responsible for losing millions of dollars, rejecting a buyout offer at a price much higher than the shares are now, and you still get to be promoted to executive chairman from CEO.
Ross Lane has been CEO of the company for ten years and is responsible for paying around $25 million in 2000 and 2002 for the Morrissey and Marcs fashion labels respectively.
Yesterday the company revealed its 2006 results (a loss) and the results of a strategic review: Morrissey and Marcs are no longer “core assets” so out they go, following the Aldo brand of footwear flicked at a loss of $1.7 million last week.
“Core assets” that are being kept on the books are the Polo Ralph Lauren and Oroton brands which together account for around 68% of sales which in 2006 amounted to $157 million. It’s hardly rocket science this strategic review stuff.
So after losing all that money a restructure and a pretty simple review, Lane is going to relinquish the CEO’s role and become Executive Chairman and the Marcs and Morrissey labels are going to be sold or closed.
And as part of the announcement from OrotonGroup yesterday, Sally Macdonald will become chief executive officer, replacing Ross Lane. She’s a management consultant and was employed on the review and obviously did so well she had to be converted to a CEO!
Mr Lane will remain as managing director until the annual general meeting in December, at which time he will become Executive Chairman.
And that’s natural of order of things in Sydney’s tight, social Eastern Suburbs-based rag trade and fashion industries. Lane, along with other members of his family still controls more than 52% of OrotonGroup’s issued capital, so it was hard to imagine him walking the plank.
The 2006 result, also released yesterday, shows why some radical surgery was needed. OrotonGroup reported a net loss of $9.44 million for the year ended July 29, compared to a profit of $1.66 million in the previous year. That was after write-downs of $13.2 million in what’s now referred to as “mostly non-core assets”. Well before the results of the review were known the likes of Marcs, Morrissey and Aldo were “core assets”.
And the non-Lane shareholders? Well the $2.50 buyout offer from the Catalyst group is now just a distant memory: OrotonGroup shares closed at $1.43 on Monday.