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Tag: esprit

  • Esprit sales flat, as expected

    Esprit sales flat, as expected

    Largely in line with expectations, Esprit sales were flat, the fashion brand says in its interim report for the six months to December 31.

    While its overall turnover was down 0.4 per cent overall, retail turnover grew 6 per cent while wholesale turnover fell 11.4 per cent.

    The gross profit margin for Esprit Holdings was stable at 50.5 per cent, while the net loss of HK$238 million was in line with expectations. The group had a healthy net cash position of HK$4.2 billion with zero debt.

    Unfortunately, positive retail sales growth in Europe was offset by continued weakness in the wholesale channel, and negative development in the Asia Pacific region. Asia Pacific turnover declined 6 per cent year-on-year, mainly dragged down by China with its 11.6 per cent drop. China represents 46 per cent of the region’s turnover.

    In its breakdown of turnover in Asia Pacific, China led with HK$655 million, 7 per cent of group turnover. Then came Hong Kong (HK$185 million, 2 per cent, down 0.4 per cent), Australia and New Zealand (HK$162 million, 1.7 per cent, up 0.3 per cent), Singapore (HK$129 million, 1.4 per cent, down 4.7 per cent), Taiwan (HK$98 million, 1.1 per cent, up 6.5 per cent), Malaysia (HK$97 million, 1 per cent, down 2.7 per cent), Macau (HK$56 million, 0.6 per cent, down 12.7 per cent) and others (HK$43 million, 0.5 per cent, up 6.2 per cent).

    In the previous financial year, the group moved towards vertical integration which resulted in more cost-efficient product development and supply chain processes, allowing product improvements in terms of design, quality and value-for-money.

    To maximise the selling potential of its improved products, this past year the group started pursuing an Omnichannel business model. In its early stages, this has led to improvements in growing its loyal customer base “Esprit Friends” and fully integrating the commercial activities of all sales channels.

    In September, the group launched an intensive brand-marketing campaign to strengthen and rejuvenate its image.

    Performance during the first six months of this financial year (between July and December) indicated that the vertical and omnichannel model was an effective basis to turn around its business, the company said.

    In its report, the company paid tribute to its co-founder, Doug Tompkins, who died in December, describing him as a “conservationist, outdoorsman, philanthropist, agriculturist and businessman”. He and his then wife, Susie Buell, formed the company in 1968. Esprit’s collections are available in 40 countries, in about 870 directly managed retail stores and through more than 7500 wholesale sales points including franchise stores and department-store outlets. The Group markets its products under two brands, Esprit and EDC.

    Listed on the Hong Kong Stock Exchange since 1993, Esprit has headquarters in Germany and Hong Kong.

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  • Losses force Esprit to downsize

    Losses force Esprit to downsize

    Following a first half loss of HK$238 million (US$30.6 million), fashion retailer Esprit plans to prune unprofitable outlets while improving productivity.

    “In the very short term, we will continue to see the closure of unprofitable spaces from our retail store network and our wholesale partners’ points of sale,” the company says in its interim results announcement. It expects these actions will help group turnover remain stable although it may be reduced.

    During the six months, the company posted a 13 per cent dip in sales to HK$9.31 billion. It says the losses are partly the result of the unfavourable impact of the euro depreciating against the Hong Kong dollar.
    With a loss per share of 12 cents, the directors did not declare an interim dividend.

    Meanwhile, the company has seen positive retail sales growth through both online and offline channels, particularly in Europe. Its challenges lie in its wholesale business, currency risks and lower performance in Asia.
    It says the underperformance in the Asia-Pacific region was partly attributable to a combination of volatility in the financial markets, the economic slowdown in China and the devaluation of the yuan, which significantly dampened consumer sentiment.

    Esprit’s largest geographic market, Germany, had HK$4.44 billion turnover, representing year-on-year growth of 1.5 per cent. For the rest of Europe the turnover of $3.38 billion was down from $3.92 billion of the previous year’s second half. Turnover in Asia Pacific amounted to $1.42 billion, a year-on-year drop of 6 per cent.
    Esprit says it faces challenges ahead with volatility in the financial markets and economic uncertainty that could further dampen consumer sentiment, especially in Asia. And if the euro continues to be weak, it would put pressure on the group’s gross profit margin.

    Meanwhile, the group is expecting an estimated net gain of about $725 million from the sale of six wholly owned property subsidiaries in Hong Kong, a deal finalised in December. Once the sales is settled, the group plans to lease back most of the properties.

    Also the group has introduced efficiencies in its product development and supply chain processes, as well as developing a “more ambitious” commercial strategy using an omnichannel model. It has been using an intensive brand-marketing campaign since September to strengthen and rejuvenate its image.

    Already it has seen positive sales performances, plus increased customer loyalty and better online and mobile sales.

    “Driving these productivity gains further remains our top priority in the near term,” says the company, noting an increase to 49 per cent of eCommerce sales by mobile devices and a 92 per cent growth in smartphone sales.

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  • Esprit remains confident despite first-half loss

    Esprit remains confident despite first-half loss

    A strategic plan is starting to yield results for Esprit, which is buoyant in its outlook despite a first-half loss weighted on by weakened demand in China.

    Net loss for the Hong Kong-listed fashion retailer amounted to HKD238m (£22m) for the six months to 31 December, compared to a profit of HKD47m (£4.3m) in the same period the year before.

    Esprit introduced a vertically integrated business model in its previous financial year, the same supply chain process used by high street giant Zara. Esprit said this, coupled with cost efficient product development, is enabling it to develop improved products in terms of design, quality and value-for money.

    “The performance during the first six months of this financial year gives us confidence that the implementation of our vertical and omnichannel model is an effective basis to turnaround our business,” said CEO Jose Manuel Martinez.

    “We remain confident that we are heading in the right direction and are laying the necessary foundation to restore competitiveness and long term growth for Esprit.”

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  • Clothing retailer Esprit reports first-half loss

    Clothing retailer Esprit reports first-half loss

    Clothing retailer Esprit Holdings Ltd (0330.HK) posted a loss in the first half, hurt by a slowdown in China and a weak euro. Esprit reported a net loss of HK$238 million ($30.7 million) for the six months ended in December, compared with a profit of HK$47 million a year earlier. Turnover fell to HK$9.3 billion from HK$10.7 billion.

    Esprit has been in the midst of an ambitious revamp over the past year that has included store closures, price adjustments, new return policies, and technology and distribution improvements.

    “Looking ahead into 2H FY15/16, we remain confident that we are heading in the right direction and are laying the necessary foundation to restore competitiveness and long term growth for Esprit,” the company said in its earnings report.

    Turnover at Esprit’s largest market, Germany, grew 1.5 percent year on year in local currency terms. Retail turnover grew 8.6 percent, while wholesale turnover declined 9.6 percent.

    Gross profit margin remained unchanged at 50.5 percent.

    “The weakness in the Euro, if persists, will put some pressure on the group’s gross profit margin,” the company said.

    Esprit, which earns the bulk of its revenues in Europe, said the operating environment appeared challenging amid volatile financial markets and economic uncertainty that might dampen consumer sentiment.

    Shares in Esprit closed up 2.9 percent on Tuesday, outpacing a 0.3 percent fall in the overall market.

  • Esprit sells Hong Kong offices to free cash

    Esprit sells Hong Kong offices to free cash

    Embattled apparel retailer Esprit has sold its Hong Kong office block on a leaseback arrangement to free capital for its continuing reform plan.

    The transaction will deliver Esprit an estimated one-off net gain of HK$725 million.

    The company said in a statement the  proceeds will be used by the group as general working capital, including funding any future investment opportunities that may arise.

    “The lease of the Hong Kong offices will better reflect the cost of the local operation, and hence help management efforts to streamline the actual current cost structure.”

    The property has been sold to Phoenix Property Investors for $918 million.

    The offices comprise five floors and 16 car park spaces at 39 Wang Chiu Rd in Kowloon, with settlement scheduled for March 21 next year.

    Four of the floors will be leased back and 13 of the car park spaces for six years initially, representing a 20 per cent contraction of the group’s office space requirement.

    In the year to June 30, Esprit reported a net loss of $3.7 billion, largely due to impairments.

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  • Esprit just made a lot of money? Look again

    Esprit just made a lot of money? Look again

    Fashion icon Esprit is making headlines again, this time for the profitable sale of its Hong Kong headquarters.

    The struggling retailer said it made a profit of HK$725 million (US$93.53 million) from the sale of the premises — five floors in Enterprise Square in Kowloon Bay — to Phoenix Property Investors for HK$918 million.

    The buyer plans to lease the space back to Esprit for HK$2.43 million a month. That’s equivalent to a gross yield of about 3 percent on the deal, or 4 percent, assuming the additional one floor will be leased to Esprit at the same rate.

    The lease, which starts after the deal closes in March, will be for three years, renewable at a 20 per cent premium after the third year.

    The money would have been nothing to Esprit, once owned by Michael Ying, in its heyday when it churned out HK$5 billion in profits. In the financial year to June 30, 2015, Esprit made a net loss of HK$3.7 billion, or HK$1.90 per share.

    Esprit bought the property in 2004 for HK$200 million during the so-called “golden decade of retail” as mainland tourists began arriving in Hong Kong in great numbers.

    At the end of the heady run, apparel retail sales were up 126 per cent, with the biggest chunk going to three global fast fashion retailers — Japan’s Uniqlo, Sweden’s H&M and the Spanish giant Zara.

    Apple Daily reports that the three retailers have more than 80 outlets in Hong Kong combined.

    Most of its rivals did not disclose their sales figures but H&M said it recorded HK$1.29 billion in the first three quarters ended August.

    Where was Esprit in all of this?

    The Hong Kong flagship was embroiled in one of the greatest collapses in the competitive fashion industry.

    Sales from Hong Kong were down 8.4 per cent to HK$386 million, with its store network shrinking to 15 shops from 46 in 2006.

    Among the big winners were small designers such as Bauhaus, I.T. and low-end retailers such as Bossini, although Giordano lost market share.

    Altogether, local brands had 460 shops last year, according to Apple Daily, but their market share fell to 14.5 per cent from 18 per cent in 2006. Now we know why Esprit had to sell its headquarters.

    Yet, this is only one chapter in a painful restructuring that has already lasted more than five years.

     

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  • Esprit Q1 turnover slips 15 per cent to HK $4.7 billion

    Esprit Q1 turnover slips 15 per cent to HK $4.7 billion

    Clothing retailer Esprit Holdings Ltd reported a 14.9 percent slide in first-quarter turnover on Monday as sales in Europe lagged and it cut its store footprint.

    Turnover in Hong Kong dollar terms fell to HK$4.7 billion in the three months ended Sept. 30, while the company cut its total controlled floor space by 7.6 percent.

    Turnover in Germany, which is the company’s biggest market and accounts for nearly half of its business, fell 15.5 percent. Turnover in the rest Europe – its second biggest market – fell 15.4 percent.

    In local currency terms, turnover fell 0.4 percent.

    The majority of the floor space reduction was in Esprit’s wholesale business. Retail floor space was reduced by just 1.3 percent and comp store sales growth was 10.8 percent.

    Esprit shares closed up 3.54 percent at HK$6.72 on the Hong Kong Stock Exchange earlier in the day.

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  • Esprit ‘on the right track’

    Esprit ‘on the right track’

    Hong Kong listed fashion group Esprit says its full year financial loss masked a positive phase of its turnaround program.

    Full year turnover fell 11.5 per cent (or 19.8 per cent in Hong Kong dollars) and the company posted a loss of HK$3.683 billion, largely due to impairments.

    In its profit announcement the company described the year as “exceptionally challenging” with trading affected by both internal and external factors.

    “Nevertheless, from a strategic perspective, it has been a year of significant achievement as the group completed the most vital and demanding phase of our turnaround plan. We have successfully installed the foundation enabling us to enhance our products and optimise sales performance across all channels (online, offline, retail and wholesale).

    “It is encouraging to see the first signs of a positive sales trend for our new Vertical Products’, which gives us confidence we are on the right track to restoring the competitiveness of Esprit.”

    The group blamed the sales decline on reduced store numbers (down 8.8 per cent), an unusually warm winter in Europe which impacted on Autumn/Winter sales volume and prices; declining apparel sales in Germany (the total market shrunk in nine of 12 months);  internal restructuring and unfavourable exchange rates.

    Group CFO Thomas Tang said that although the challenging market had considerable impact on Esprit’s turnover, its gross margin remained stable and savings were achieved in most cost lines of our regular operations.

    “With our priority on cash preservation over the past two years, the Group is on a sound financial footing, with a healthy balance sheet that we intend to leverage to decisively execute the strategies that shall drive top line growth in the near future.”

    Esprit is debt free.

    Tang said the last financial year was devoted to the implementation of the most demanding, yet vital, part of the group’s strategic plan: the ‘Transformation’ phase. During this phase, a vertically integrated business model (‘Vertical Model’) was introduced within Esprit to enhance the speed and efficiency of its product development and supply chain processes, and thereby significantly improving the design and value for money of its products.

    More specifically, the following have been implemented:

    • Lean supply chain management (from over 350 to below 230 suppliers).
    • Category management teams (all product divisions transformed).
    • New merchandising model (buying and merchandising fully centralised).
    • Reduction in product range (30 per cent to 40 per cent reduction of options).
    • Seasonal product calendar (from 12 monthly collections to four seasons).
    • Fast-to-market product development (two to three months lead time in the Trend Division and the fast-reaction capsules in all other divisions).
    • Stock management optimisation (pending additional stock replenishment capacity and capabilities in the central distribution center).

    “More importantly, the group has observed progressively positive developments in terms of product sales performance following the introduction in February 2015 of the Spring/Summer 2015 collections, the first ones developed under the Vertical Model: Retail turnover decline has narrowed consistently over each subsequent quarter during the year (Q1 -15.0%; Q2 -10.3%; Q3 -8.3%; Q4 -6.8%).

    Same store sales rose 4.1 per cent in the quarter to August and sales in Germany, its largest market, outperformed the market in each of the last three months.

    Retail sales of the Esprit Women divisions recorded 5.3 per cent year-on-year growth for the last three months and the Trend Division (representing 2.6 per cent of group turnover), reported full year turnover growth of 29.7 per cent.

    Esprit chairman Raymond Or said the group maintained a clear focus to execute the most complex and critical phase of its transformation in the year past, and made good progress despite a difficult operating environment.

    “The growth phase that we are now embarking upon is not without its challenges, but there is much hope and excitement across all levels of our organisation as we leverage the strong foundation that we have laid over the last two years. Every successful journey takes time, and we believe that we are nearing our final destination – which is to restore the long term competitiveness of our group.”

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  • Esprit warns of “substantial loss”

    Esprit warns of “substantial loss”

    Esprit has issued a surprise profit warning to investors saying it expects a “substantial loss” in the full year to June 30.

    The warning is a surprise, because just 11 days earlier the Hong Kong-listed fashion retailer said its turnaround program was “on track” with a good customer response to new ranges and positive traing improvements.

    “We remain fully confident that our current strategies will enable us to turn around Esprit and to establish a strong foundation for future long term growth.”

    However, in a document filed with the Hong Kong Stock Exchange yesterday (Monday May 18), Esprit appears to have reconsidered its position based on figures for the 10 months to April 30.

    “The anticipated loss is mainly attributable to the following non-recurring provisions and impairments resulting from management’s assessment of the fair values of the assets of the group, as well as an expected operating loss:

    “Due to the significant underperformance of the group’s operations in China in the past two years (turnover decline of 28.3 per cent and 21.6 per cent year-on-year in local currency for 2014 year and for the first half of 2015 respectively), there is an impairment of the goodwill in association with the China business estimated to be in the range of HK$2,500 million to HK$2,700 million. This impairment is a non cash item. A number of factors, both external and internal, have led to such weak performance in China, mainly the year-on-year reduction in total controlled space (down 24.3 per cent in 2014 and 23.1 per cent in the first half of 2015) which results from our decision to close unprofitable retail stores and the large decline of controlled wholesale space; and Inventory clearance by wholesale partners, including the special return agreements to solve our long time problems with aged inventory in the wholesale channel; and a challenging operating environment and softer domestic economic growth.”

    Esprit says the necessary restructuring of the operations in China is now complete and it is beginning to work on growth development in the country.

    Furthermore, due to the weaker than expected sales performance of directly managed retail stores, there are provisions and impairments, which are non-cash items for 2015, resulting from provisions for store closures and onerous leases, estimated to be in the range of HK$280 million to HK$300 million and impairment of fixed assets of directly managed retail stores, estimated to be in the range of HK$160 million to HK$170 million.

    Finally, the company is expecting an operating loss, as a result of higher than expected decline in the group’s turnover, especially during its Autumn/Winter 2014 season, and the corresponding operating deleverage effect.

    The company said final results for the year to June 30 are expected to be released in September 2015.

    Esprit reiterated its “good progress” in various fronts of the transformation plan.

    “In anticipation for continued improvement in product performance, we will be increasing our efforts in marketing as well as in implementing an ambitious omni-channel model that will enhance the customer experience across our multiple distribution channels.

    “The group remains confident our current strategies will enable us to turnaround Esprit and to establish a strong foundation for future long term growth.”

  • Esprit positive as network shrinks

    Esprit positive as network shrinks

    Fashion retailer Esprit continues to cull its retail network, but despite reduced sales is confident its turnaround program is on track.

    In the third quarter to March 31, the Hong Kong-listed company’s turnover fell 25.5 per cent in Hong Kong dollar terms to HK$4.51 billion, or 12.2 per cent in local currencies where it trades. The Hong Kong figure has been exaggerated by a 17.7 per cent depreciation in the Hong Kong dollar-euro exchange rate.

    Retail turnover in Asia Pacific grew by two per cent year-on-year in the third quarter, despite a 2.6 per cent reduction in net sales area, or 20 fewer company-owned stores.

    Over the last 12 months Esprit has reduced the number of Asia-Pacific stores supplied by its wholesale division by 40 per cent, or 188 stores.

    Wholesale turnover in Asia Pacific thus declined by 8.8 per cent year-on-year in local currency (compared with a 49.3 per cent reduction in the first half of the year). Esprit says this improvement was mainly attributable to the success of its special return agreements with wholesale partners in China which helped to clear considerably aged inventories in the same period last year. That, in turn, has resulted in an improved order intake for the third quarter.

    “In the third quarter, the Transformation phase continued to make good progress,” Esprit said in a stock exchange filing.

    “Our leaner supply chain maintained its positive impact on our sourcing costs, enabling us to reinvest the savings to further improve the value-for-money of our products. Consequently, the new collections developed under the Vertical Model, which were available in stores since February 2015 have received a more positive response.

    “While this favorable response is encouraging, it is too early to assess the full impact of the new products on our sales given their short time in the market.”

    Esprit said to drive sales development and support its sustainable growth, the company will be increasing its marketing efforts and implementing an ambitious omni-channel model to enhance the customer experience across its multiple distribution channels.

    “The savings from a leaner supply chain are also driving a year-on-year improvement of our gross profit margin, which is key for the profitability of the company.

    “We remain fully confident that our current strategies will enable us to turn around Esprit and to establish a strong foundation for future long term growth.”

    Esprit concluded by saying it was encouraged by improved sales of its new collections which went on sale from February this year.

    “Retail turnover for the months of February and March 2015 declined year-on-year by 2.9 per cent in local currency – better than our square meters reduction.

    “The positive performance in Asia Pacific, where we did not face the same issues from Autumn/Winter 2014 season, was attributable to  better availability of merchandise in stores as a result of improved logistics support and more successful tactical promotions in all of our Asian markets for the Chinese New Year holiday.”

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  • Slumping sales, store closures hit Australian Esprit

    Slumping sales, store closures hit Australian Esprit

    Slumping sales and store closures led to a small loss for the Australian arm of international fashion retailer Esprit, as its parent company’s shares come under attack from short sellers.

    Esprit bills itself as the largest international fashion retailer in Australia and New Zealand, and has operated in Australia for more than 30 years.

    It employs nearly 400 people and has dozens of stores throughout Australia as well as selling through department store Myer. But in recent years, Australia has become increasingly popular for international fashion retailers, with global giants Uniqlo, Zara, H&M and Topshop setting up more than a dozen stores in the past few years.

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  • Esprit warns of profit decline

    Esprit warns of profit decline

    Apparel chain Esprit has wanted shareholders its half year profit to December 31 is likely to be between HK$40 million and $50 million – half the $95 million of the same period a year earlier.

    The company said based on preliminary accounting figures, the expected lower net profit is based on falling turnover. This was due to a combination of prolonged unusually warm weather in Europe for majority part of the period, resulting in much lower than expected sales of its autumn and winter products together with special return agreements in China to address aged inventory in the wholesale channel. Although these returns were completed in the first quarter, it impacted on top line performance in the half year.

    “Notwithstanding the anticipated lower net profit in the first half of the financial year, the group has continued to devote maximum efforts to significantly improve our products, particularly in terms of design, quality, and value for money, by implementing faster and more cost efficient product development and supply chain processes as part of a vertical business model (New Business Model).

    “The New Business Model has been in place since the beginning of this financial year, in July 2014. The Spring/Summer 2015 collections, the first that have been entirely developed under the New Business Model, will arrive at stores from February onward. The products developed under the New Business Model have thus far received a positive response from our wholesale partners.

    “While the end consumer response can only be fully tested once the products reach the shop floors, we remain confident of the progress made in our product development,” the company said.

    The company will announce its interim results for the six months to December 31 in February.