Esprit sales flat, as expected
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Largely in line with expectations, Esprit sales were flat, the fashion brand says in its interim report for the six months to December 31.
While its overall turnover was down 0.4 per cent overall, retail turnover grew 6 per cent while wholesale turnover fell 11.4 per cent.
The gross profit margin for Esprit Holdings was stable at 50.5 per cent, while the net loss of HK$238 million was in line with expectations. The group had a healthy net cash position of HK$4.2 billion with zero debt.
Unfortunately, positive retail sales growth in Europe was offset by continued weakness in the wholesale channel, and negative development in the Asia Pacific region. Asia Pacific turnover declined 6 per cent year-on-year, mainly dragged down by China with its 11.6 per cent drop. China represents 46 per cent of the region’s turnover.
In its breakdown of turnover in Asia Pacific, China led with HK$655 million, 7 per cent of group turnover. Then came Hong Kong (HK$185 million, 2 per cent, down 0.4 per cent), Australia and New Zealand (HK$162 million, 1.7 per cent, up 0.3 per cent), Singapore (HK$129 million, 1.4 per cent, down 4.7 per cent), Taiwan (HK$98 million, 1.1 per cent, up 6.5 per cent), Malaysia (HK$97 million, 1 per cent, down 2.7 per cent), Macau (HK$56 million, 0.6 per cent, down 12.7 per cent) and others (HK$43 million, 0.5 per cent, up 6.2 per cent).
In the previous financial year, the group moved towards vertical integration which resulted in more cost-efficient product development and supply chain processes, allowing product improvements in terms of design, quality and value-for-money.
“The gross profit margin for Esprit Holdings was stable at 50.5 per cent, while the net loss of HK$238 million was in line with expectations.”
To maximise the selling potential of its improved products, this past year the group started pursuing an Omnichannel business model. In its early stages, this has led to improvements in growing its loyal customer base “Esprit Friends” and fully integrating the commercial activities of all sales channels.
In September, the group launched an intensive brand-marketing campaign to strengthen and rejuvenate its image.
Performance during the first six months of this financial year (between July and December) indicated that the vertical and omnichannel model was an effective basis to turn around its business, the company said.
In its report, the company paid tribute to its co-founder, Doug Tompkins, who died in December, describing him as a “conservationist, outdoorsman, philanthropist, agriculturist and businessman”. He and his then wife, Susie Buell, formed the company in 1968. Esprit’s collections are available in 40 countries, in about 870 directly managed retail stores and through more than 7500 wholesale sales points including franchise stores and department-store outlets. The Group markets its products under two brands, Esprit and EDC.
Listed on the Hong Kong Stock Exchange since 1993, Esprit has headquarters in Germany and Hong Kong.
Questions & Answers
Q.What contributed to the stability of Esprit Holdings' gross profit margin?
What contributed to the stability of Esprit Holdings' gross profit margin?
The group's gross profit margin remained stable at 50.5 per cent. This was likely helped by moves towards vertical integration, which resulted in more cost-efficient product development and supply chain processes.
Q.What is the primary reason for the negative performance in the Asia Pacific region?
What is the primary reason for the negative performance in the Asia Pacific region?
The Asia Pacific region's turnover declined by 6 per cent year-on-year. This was mainly due to a significant 11.6 per cent drop in China, which represents 46 per cent of the region's total turnover.
Q.How did the new business strategies impact the company's customer base?
How did the new business strategies impact the company's customer base?
The early stages of the Omnichannel business model led to improvements in growing Esprit Friends, the company's loyal customer base. It also fully integrated commercial activities across all sales channels.
Q.What was the financial position of Esprit Holdings at the end of the reporting period?
What was the financial position of Esprit Holdings at the end of the reporting period?
Esprit Holdings reported a healthy net cash position of HK$4.2 billion with zero debt. The net loss of HK$238 million was in line with expectations.
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