Esprit Holdings’ sales decline is no surprise

In line with expectations, a first-quarter decline of 11.8 per cent in sales has been recorded by clothing, footwear, accessories, jewellery and housewares manufacturer Esprit Holdings.

It says the results for the quarter ended September 30 were as expected following a reduction in operating costs and store footprint. The company reduced total controlled space (retail and wholesale) by 14.5 per cent, closing unprofitable stores. During the quarter it closed 9240 sqm of retail net sales area, (mainly concession counters in China), further reducing the group’s retail net sales area to 282,332 sqm.

Because of structural pressure in its wholesale channel, its controlled space was also further reduced, by 13,304 sqm in the quarter to 343,448 sqm. Notwithstanding this, the decline in wholesale revenue was 11.4 per cent, reflecting an improvement in space sales productivity, Esprit said.

While sales productivity continued to improve in July and at the beginning of August, this turned negative in line with general market developments. Since mid-August temperatures in Europe were far higher than during the same period last year, significantly impacting store traffic and initial sales of the autumn collections both offline and online.

For the Asia Pacific, lower consumer traffic hit sales, as well as a strategic decision to restructure the company’s retail footprint and cut back on promotional activity. “As expected, these measures put short-term pressure on revenue, but they are crucial for Esprit to regain profitability in the mid-term,” said the group.

“Despite the weak sales development in the first quarter, the group’s results remain on track and management stays focussed on the execution of the strategic plan: developing the vertical and omnichannel models; tackling the challenges in the wholesale channel and in Asia Pacific; and pushing the reduction of structural costs further in order to continue the recovery of the group’s overall profitability.”