Esprit issues shock profit warning

Apparel retailer Esprit says it is on track to record its first profitable half year since the second part of 2017.

In a positive profit alert filed with the Hong Kong stock exchange the embattled retailer – which lost US$463 million in the six months to June last year, mainly through writedowns – says it expects a profit of “not less than HKD 110 million” (US$14 million) for the six months to June this year. However, HKD 85 million ($10.9 million) of is due to currency-exchange gains.

Sales for the half-year were down 6 per cent to HKD 3.8 billion (US$488 million).

During the past three years, the company has slashed its store network, quit all Asian markets, culled staff and restructured its European operations under a form of bankruptcy protection to try to stem years of losses.

Esprit’s acting executive chairman Christin Chiu said the reduction in sales was due to Covid-related lockdowns in key markets, and the closure of its Asia-Pacific retail operations.

She said the group overcame the adverse effects of a significant decrease in consumer traffic and continued to implement its cost-control policy and development strategies, resulting in positive improvement in the overall operating conditions.

“This performance reflects accelerated growth in the e-commerce channel in the first half of 2021, with a 17-per-cent year-on-year increase in the segment revenue.”

She said the turnaround from loss to profit was due to the significant reduction in writedowns, cost control measures, higher sales and gross profit through its e-commerce channel, and the exchange gain.

Esprit plans to release its interim results on August 24.