Embattled fashion label Esprit posted another loss in the December half-year, as sales plunged by HK$1 billion – largely due to a major store cull in Asia.
Esprit recorded a loss of HK$331 million (US$42.46 million) for the period, compared with a $1.773 billion (US$227 million) deficit in the December 2018 half. The previous year’s figures were impacted by one-off restructuring costs and write-downs associated with implementing its strategic plan.
Global sales were down from $6.766 billion ($867.931 million) to $5.763 billion ($739.249 million). In Asia, the company reported a sales decline of 40 percent, as it heavily rationalized its store network.
Despite the red ink, Esprit’s management says the execution of its strategic plan to restructure the company and revitalize the brand “has continued to progress well and is on track”.
“Overall, the management is pleased with the performance of the group for the six months … as we have delivered financial results in line with management expectation despite the challenging market conditions,” it said in a results filing.
Asia, where Esprit has stores in China, Singapore, Malaysia, Taiwan, Hong Kong, Macau, Thailand and the Philippines, accounted for just 7.2 percent of group sales in the period. Sales across the region fell 40 percent year on year, mainly due to a 36-per-cent reduction in the trading area as unprofitable stores were closed.
The Asian network was culled from 82 standalone stores on January 1 to just 55 by December 31 and concession counters from 111 to 75. All 33 outlet stores in the region were closed last year.
“Consumer traffic remains one of the biggest problems for retail in the region which recorded a decline in comparable consumer traffic of approximately 23 percent. Comp-store sales in the region declined by 16.9 percent,” the company said.
In China, Esprit entered into a partnership with Mulsanne Group to manage the market, which it says will create a strong base for the brand, improve the relevance and accelerate growth.
In Europe, which now accounts for 45 percent of its sales, the company has increased the proportion of stock sold at full price, improved its gross profit margin and grew comp-store sales in three of the six months.
Global operating costs were slashed by 20 percent during the half-year, and underlying operations “almost broke even” with a loss of HK$15 million (US$1.9 million).
“Today the group’s business is in a much better state than 12 months ago,” the company said in its results filing. “It is leaner, quicker, fitter, more agile, and is well along the way to creating a new culture which is all about empowering and having fun while delivering results.”