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Tag: loss

  • Esprit confirms to experience heavy loss

    Esprit confirms to experience heavy loss

    Struggling fashion label Esprit is looking to a new CEO and incoming chairman to turn the business around after a horror year.

    The Hong Kong-listed company posted a loss of HK$2.554 billion (US$325.5 million) for the year to June 30, pretty much in line with a profit warning issued early last month.

    On the plus side, the result included a raft of write-downs, including costs of exiting the Australia and New Zealand markets, cancelling leases for non-performing stores and many other one-offs, leaving the new management team with a clean slate to commence a turnaround.

    With widespread store closures, total group revenue fell 11.1 per cent to $15.455 billion, yet overheads were trimmed just 3.3 per cent, widening the business’ operating loss. New executive chairman Dr Raymond Or Ching Fai, said in a stock exchange filing the sales decline was higher than expected with falling customer traffic at both online and offline stores.

    He said Esprit had been affected during the year by “the rapidly evolving retail industry, fueled by the continuous growth of e-commerce leading to changes in consumer consumption patterns, and the intensification of price competition driven by both pure digital players and fully vertical retailers”. To be fair, the same factors are affecting every fast-fashion and mid-tier fashion brand, yet few of them are performing as badly as Esprit.

    By region, in Germany, Esprit’s largest market accounting for about half of total sales, revenue of $7.79 billion was down 10.9 per cent on last year.

    For the rest of Europe, America and the Middle East, sales fell 9.8 per cent and in Asia Pacific, which accounts for just 12.3 per cent of total revenue, sales fell 15.2 per cent. Offline sales in Asia-Pacific fell 17.1 per cent and online sales fell 5.3 per cent.

    ‘Far from satisfactory’

    Or said the company recognises the results are “far from satisfactory” and the situation has challenged both the board and the management team.

    “We believe the fundamentals of the strategic initiatives as presented in our last annual report (namely brand rejuvenation, product elevation, channels next generation, markets rightsizing and expansion, and cost reduction) remain sound and are necessary to recharge the potential of the group. However, we concede that the progress to date has yet to reignite sales momentum or translate into a positive financial performance.”

    He said that despite the operating loss, the company remained in a healthy financial position, debt-free and with a net cash balance of $4.5 billion, $700,000 less than at the end of the previous year. Some of that cash – $237 million – was used to repurchase about 2.9 per cent of the company’s shares.

    New group CEO Anders Kristiansen, who took the helm on June 1, Is leading what Or describes as a “vigorous” update of the strategic plan, scheduled to be finalised within three months.

    “In our drive to support growth, we must sharpen the brand identity, create an inspiring omnichannel shopping experience for our customers, and launch stylish and geographically adapted collections to improve sales per square meter productivity. We will continue to leverage on the newly installed dual product engines organisation, whereby the main line focuses on catering to existing customers in our core markets, and the fast-to-market line aims to introduce trendier products for the online and Asia markets, particularly China,” he said.

    “These efforts will work in tandem with data generated from extensive consumer research to ensure that our brand, products and channels properly resonate with Esprit’s target customers. We will bring our customers and what Esprit stands for as a brand to the centre of everything we do in order to become more relevant to our customers again and provide them with a strong brand experience.

    “While we certainly have a lot of work in front of us, I am convinced that by aligning the execution of our Plan, the better days of Esprit are ahead of us.”

    However the company has warned shareholders of a further drop in sales for the current financial year in the “low double-digit percentage” range year on year, mainly due to the continuing rationalisation of its distribution footprint and further decline in customer traffic amid Esprit’s execution of a plan to rebuild store visitor numbers.

    This year marks the 50th anniversary of Esprit, and its 25th anniversary of listing on the Hong Kong stock exchange.

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  • Thai Airways International Shares Take A Dive Last Week

    Thai Airways International Shares Take A Dive Last Week

    The President of Thai Airways Charamporn Jotikasthira has told reporters that the full-year target of 180 billion baht is unlikely to be achievable.

    A report posted with regard Thailand’s crackdown on China’s so-called zero-dollar tours has led to a sharp decline in Chinese tourists. These tours were offered below cost, with operators making big profits through kickbacks from affiliated souvenir shops and service providers from which travelers were forced to buy at inflated prices.

    Thai Airways revenue from Chinese passengers has dropped by 25% over the past several months because of this crackdown.

    There are obviously other factors involved as Charamporn also said many economizing steps have not yet been fully implemented, suggesting that the full-year cost-cutting target may also be missed.

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  • Air Asia Philippines cuts net loss to P1.2b

    Air Asia Philippines cuts net loss to P1.2b

    The Philippine unit of Southeast Asia’s largest budget airline said it reduced  net loss by 12 percent in the third quarter on higher passenger traffic.

    Air Asia Philippines said net loss amounted to P1.2 billion in July to September, down from the P1.4-billion loss it reported a year ago.

    Revenues increased 24 percent to P2.57 billion in the third quarter from P2.07 billion in the same period last year.

    “The increase in revenue can be attributed to higher passenger volumes which increased by 8 percent year-on-year and the increase in average fare by 21 percent year-on-year,” Air Asia Philippines said.

    Passengers carried by AirAsia Philippines increased 8 percent to 976,765 from last year’s 901,957, while load factor went down by 1 percentage point to 83 percent from 84 percent.

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  • Ericsson swings to $22.4m Q3 loss

    Ericsson swings to $22.4m Q3 loss

    Ericsson swung to a loss of 200 million kronor ($22.4 million) in the third quarter as a result of weaker sales, particularly in the networks segment.

    The net loss – which marked a reversal from a 3.1 billion kronor net income in the third quarter – can be attributed to a number of negative industry trends impacting demand, according to Ericsson.

    Reported sales declined 14% year-on-year to 51.1 billion kronor, with network segment revenues down 19% due to weaker demand for mobile broadband.

    Gross margins also shrank significantly – from 33.9% to 28.3% – as a result of the decline in demand for network equipment in comparison to the lower-margin services segment.

    “The negative industry trends from the first half of 2016 have further accelerated, impacting Q3 sales, primarily relating to mobile broadband…The current industry trends indicate a somewhat weaker than normal seasonal sales growth between the third and fourth quarters,” Ericsson president and CEO Jan Frykhammar said.

    “In addition a renewed managed services contract in North America, with reduced scope, will impact sales negatively. The current business mix of coverage and capacity sales in mobile broadband is anticipated to prevail in the short term.”

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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 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.”