Esprit back in the red as its collections fall out of fashion

By

Barbara Santamaria

Published
Sep 18, 2018

Esprit announced on Tuesday it has launched a review of its business after revealing disappointing results for financial year 2017/18, driven by falling retail sales and product that “doesn’t meet customers’ expectations”.  

The Hong Kong-based clothing company said revenues dropped by 11.1% in local currency terms and 3.1% in Hong Kong dollar terms in the year ended 30 June 2018, as its product failed to boost retail demand. A store closure programme also impacted sales, it said.

The deterioration of the retail channel had a significant effect on the company’s overall performance, as it relies on these sales to generate around 40% of total revenue. Revenue for the period was HK$15.45 billion (€1.68 billion), compared with HK$15.9 billion a year earlier.

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And whilst Esprit managed to cut its operating expenses by 3.3%, this was not enough to outweigh the impact from the decline in revenue. As a result, the group recorded a net loss of HK$2.55 billion (€278 million).

Directors at the company said the performance was “far from satisfactory” after having briefly enjoyed a return to profitability in the previous financial year.

“We are currently affected by a combination of internal weaknesses. This includes a high cost structure which is no longer in line with the sales level, too many loss making stores in our portfolio, a lack of clear brand identity, and product that doesn’t meet our customers’ expectations,” said CEO Anders Christian Kristiansen.

He added that an internal task force that has been appointed to gather consumer insights and establish possible strategic initiatives, with a new strategy set to be released later this fall. It is likely this strategy will include changes to the company’s brand identity and improvements to the product range to ensure it resonates with consumers.

Meanwhile, the profitable wholesale business will take a larger role in the new direction of the company, Kristiansen said. “We want to become ‘best-in-class’ in what we offer to our wholesale partners in terms of products, marketing and other support.”