Esprit posts profit in major recovery

Esprit Holdings (0330) posted a net profit of HK$21 million for the financial year ended June, marking a sharp turnaround from a HK$3.7 billion loss in the previous financial year.

Chairman Raymond Or Ching-fai said the company’s return to the black was driven by the strong performance of its online and offline retail channels, reduction in the cost of operations and an exceptional gain from the sale of office premises in Hong Kong.

“We have achieved what we wanted to do, we have stopped the ‘bleeding.’ For the first time, we were able to stop the continuous decline,” said chief executive Jose Manuel Martinez Gutierrez.

It returned to profitability even if revenue fell 8.41 percent year-on-year to HK$17.79 billion. Sales from Germany, its biggest overseas market, slid 5.9 percent to HK$8.56 billion. Revenue from the rest of Europe, representing 37 percent of the group’s total sales, amounted to HK$6.58 billion, down 7.4 percent.

In the Asia Pacific, including Hong Kong, revenue dropped 17.6 percent to HK$2.65 billion. Or said the overall market conditions remain challenging. He said the clothing industry was going through significant changes fueled by the development of online [marketing] channels and aggressive price competition.

Europe’s macroeconomic prospects look uncertain, while the Asian market has turned weaker than before, Or added. In the financial year ended June, Esprit closed down 185 retail stores globally, reducing its net sales area by 10.90 percent. Gutierrez said Esprit will step up the closure of loss-making retail outlets.Over the next two years, it also plans to cut operating expenses by HK$1 billion. He said he expects the strong growth momentum of its online business in Europe and in Asia Pacific to continue. Revenue from its online e-shop grew 6.9 percent to HK$4.15 billion.

Online sales made up 23.3 percent of total revenue, up from 20 percent in the previous fiscal year. Earnings per share was HK$0.01 and no dividend was declared.

Chief financial officer Thomas Tang Wing-yung said no dividend was declared as profit was not significant, but Esprit will consider giving out dividends if it makes better profit in the next financial year.