Esprit results signal looks promising

Embattled fashion retailer Esprit believes its first-quarter results prove its restructuring program is on track.

The Hong Kong-listed company recorded a year-on-year global sales decline of 10.8 percent in local currency terms. But in a stock-exchange filing, the company said the pressure from falling sales was “more than compensated by significant cost savings which led to an improvement in our operating results”. The company did not release profit figures, only sales data.

In the filing, Esprit said management was “encouraged by the progress made” in the three months to September 30 and “is confident that the group is on the right track to recovery”.

Esprit sales in Asia fell 44.4 percent from HK$314 million (US$40 million) to $175 million ($22.3 million), however the brand performed better in Europe where sales fell 11.6 percent (or 7.4 percent on a currency-neutral basis) from $3.02 billion ($385.5 million) to $2.671 billion ($340.9 million). Total group sales were $2.846 billion ($363.3 million), the 10.8 percent decline comparing favorably to a 14 percent decline in company-controlled retail space.

The company said in the core European market, which accounts for 85.7 percent of its revenue, it achieved small comp-store sales growth in August and September. A reduction in discounting saw comp-store gross profit improve, but it did not release figures.

In Germany, wholesale sales which have declined every quarter for seven straight years, improved by 1.8 percent in the latest quarter.

“This is an encouraging development thanks to ongoing progress made in building a best-in-class wholesale model to serve our wholesale partners,” the company said.

Again, while not releasing figures, Esprit said reduced operating expenses due to reduced headcounts, the closure or resizing of unprofitable stores, and a persistent discipline on cost control and efficiency measures enabled it to reduce operating expenses “significantly”.