Esprit confirms profits fall, commitment to invest heavily in growth

By

Sandra Halliday

Published
Aug 31, 2022

Esprit has confirmed its results for the first six months of the year and has turned in its second consecutive profitable half-year, despite profits of HK$13 million (US$1.66m) being significantly lower than 12 months earlier.

The unaudited results were widely flagged last week when the company issued a profit warning, but it said on Wednesday that it’s “back on track to consistent growth to regain [its] pinnacle market position”.

What was key to the new announcement was the company’s upbeat assessment of its prospects.

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CEO Pak William Eui Won talked of the many challenges during the half but added that “the strategies and infrastructure mentioned in the 2021 Annual Report [are] showing consistent positive results and profitable growth, forming a solid platform for future expansion to new markets. Given a financially strong and healthy balance sheet, the company will continue to invest whenever good opportunities arise”.

The company is investing heavily in “rebuilding Esprit’s brand equity, re-establishing and improving the Esprit brand image”. This will be achieved through “active collaborations with highly reputable industry creatives, cross brand partnerships, influencer design capsules, and sustainability events”. 

It will also accelerate its move into digital “by improving trading ability for the European website, upgrading internal digital capabilities, establishing an innovative hub — Esprit Futura — in Amsterdam, and launching website and digital commerce platforms in the USA, Canada, Central America and South America”.

And returning to key Asian markets is also a major part of the strategy as it focuses on Hong Kong, Korea, Taiwan, and the Philippines, with distribution including pop-up stores, proprietary websites and partners’ portals.

Pak added: “The brand’s return to Hong Kong and re-entry to Asia is one of the strategies in repositioning Esprit as an international brand with omnipresence and relevance to its customers. This combined with the improvements to Esprit, such as product offering, marketing, and digital content, aims to put the company back on track to regaining market position and consistent sustainable growth.”

As to the results, the company confirmed that as expected, total revenue for the period was HK$3.626 billion, down from HK$3.872 billion a year earlier, a 6% fall.

This was mainly due to the depreciation of the euro against the Hong Kong dollar but would have been a 2% increase if not for that issue. At constant currency, revenue would have been HK$3,934 million which would have been an increase of 2%. Meanwhile, the gross profit margin was 45.8%, marginally lower than the corresponding figures of 46.9% for the corresponding period.

As a result, the group recorded an unaudited profit attributable to the shareholders of HK$13 million, down sharply from HK$121 million. It was the second consecutive profitable half-year since the financial year ended 30 June 2017. 

The profits fall was clearly linked to the lower revenue and lower gross profit. But foreign exchange translation losses of HK$99 million, compared to foreign exchange translation gains of HK$87 million in the previous 12 months, also made a huge impact.