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FOLLOWING a warning to the market and a subsequent trading halt earlier in the week which has shaved more than $11 million from Oroton's (ASX: ORL) market value, analysts say the company's choices have essentially boiled down to two: sell its brands to an overseas buyer or quit the ASX altogether.
Citi analysts are saying the company will need to undergo a substantial restructure to try and stay afloat as shareholders continue to dump ORL stock, after Oroton issued an update calling into question its long-term profitability.
At the half year Oroton's revenues were down 10 per cent on the prior corresponding period (pcp) and EBITDA also fell by 44 per cent.
The company also announced it would be dropping popular Australian actress Rose Byrne as the face of the brand, to cut costs and transition to new "younger influencers".
Now, its revenue has taken a further 11 per cent dive at the third quarter, and it has warned the market that underlying earnings will fall as much as 85 per cent at the full year.
At FY17 Oroton is forecasting an earnings result of $3 million at most, while last year the company's EBITDA result hit $12.9 million.
Citi analysts also expect that Oroton's joint venture with American clothing retailer Gap will soon be coming to an end, as Gap's performance this year is expected to take a $3.5 million toll on Oroton's FY17 EBITDA result.
They forecast that Oroton will drop the Gap brand altogether in 2019, costing the group an estimated $6 million.
Oroton shares hit an 18-year low of $1.00 earlier this morning, and are trading down 3.22 per cent at $1.05 at the time of writing (2:35pm AEST).
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