Esprit posts profit warning

By

Bruno Joly

Published
Jan 21, 2015

Esprit keeps tradition alive in regards to financial communications. The brand-retailer has just warned its shareholders that its financial results will not be meeting expectations.

The management team, basing themselves on the preliminary numbers, is expecting total profits between 40 and 50 million Hong Kong dollars (5.2 and 6.5m USD / 3.4 and 4.3m GBP) for the quarter ended in December, compared to 95 million a year before.

Esprit, which started its financial year on 1 July, was of course affected by the spring-like temperatures in the middle of fall. It also talks about a reduction in stocks in China. Finally, the management speaks of sales that are much lower than forecast.

In the first quarter, July to September, the group's sales figures on a constant exchange rate basis plunged 16% to around 5.4 billion Hong Kong dollars. In Germany, by far the biggest market, sales went down nearly 14% to 2.5 billion Hong Kong dollars. In the rest of Europe they dove more than 17% to 234 million.

But Jose Manuel Martinez, who arrived in 2012 and was the former head of Inditex, gives a reminder that the implementation of the new and very vertical model of organisation has only been operational since last July and that the first collection to really benefit from it is spring-summer 2015.

This profit warning arrives after Esprit had returned to profit in the previous financial year. The management team had thus considered that it had achieved its objectives with an expected stabilisation of the activity for the current financial year and a return to growth as of the next one. But this fall-winter may delay Esprit's definitive return to the black a little bit longer.

1 HKD = 0.129 USD / 0.085 GBP