Shares in Oroton have nosedived after the luxury fashion retailer scrapped its forecast for earnings growth.
The company had been expecting earnings in the second half of its fiscal year to be higher than in the same period a year earlier, but third quarter earnings fell by more than $2 million.
Oroton now expects its full year earnings will be down 66 per cent on the prior year, due to the weaker than expected second half performance and the impact of a falling Australian dollar.
Its shares slumped nearly 23 per cent during morning trade but it has since clawed back some losses.
At 1425 AEST, Oroton was down 14 per cent, or 36 cents, at $2.20.
Chief executive Mark Newman said halting the heavy clearance sales that the Oroton brand had become reliant on had cost more than expected.
"The third quarter, and April in particular, reflects how much the heavy discounting from previous years has eroded the brand's prestige," he said.
"The market has remained uncertain and the timing of Easter and Anzac Day this year compared to last year also impacted sales."
Oroton also operates the Gap and Brooks Brothers brands in Australia, and sales and margins in both businesses have fallen below expectations, contributing to higher losses than a year ago.
The group now expects underlying earnings of about $4.5 million in the year to the end of July, down from the previous year's $13.3 million.
Mr Newman said more than $3 million of that decline will be caused by the weaker Australian dollar, despite Oroton's conservative hedging policy.
The new forecasts are disappointing, but Oroton is confident it will return to growth in 2015/16, he said.
Oroton entered new deals with Brooks Brothers and Gap in 2013 to plug an earnings hole left after its partnership with Polo Ralph Lauren ended.
Morningstar analyst Farina Parsons said Oroton's struggle to replace those earnings was rattling investors.
"Oroton's (share price) fall is definitely linked to the fact it's no longer expecting growth in the second half," she said.
