Esprit set to post US$503 million loss
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Enfeebled clothing retailer Esprit has just advised shareholders it expects to post a loss of US$503.2 million when it releases its annual results late next month.
With its European subsidiaries operating under a form of statutory administration and its shares trading for 12 cents each in Hong Kong today, many investors must by now be wondering if the chain has any reason to continue trading.
The company said the loss was primarily attributable to the impact of Covid-19 which it blamed for a 24-per-cent decline in revenue from $1.66 billion last financial year to about $1.277 billion this year and another $310 million in impairments on trademarks, property, plant and equipment, provisions for store closures and severance payments.
Falling sales and massive losses are not the company’s only worries right now. On July 8, Karen Lo of the family that founded Vitasoy called a special meeting of shareholders to vote on the immediate removal of Esprit’s CEO Anders Christian Kristiansen along with CFO and director, Dr Johannes Georg Schmidt-Schultes from the board.
Lo’s investment vehicle North Point Talent Ltd had spent $17 million boosting its stake in the company from 4.93 percent to just under 13 percent, making it the single largest shareholder before it lodged the requisition. That was withdrawn on July 21 by which time North Point had built its stake to 20.1 percent.
In an apparent compromise, the board appointed North Point nominees Marc Andreas Tschirner, Christin Chiu Su Yi and Wong Hung Wai as additional executive directors of the company and subsequently declared it had “strong confidence in the Group CEO and Group CFO as well as their management team”
Earlier in July, Esprit said it would axe 1100 jobs, mostly in Europe, and close another 50 German stores under its court-protected administration process. The company had closed all its Asian by the end of June in an earlier round of cuts as it attempted to reverse years of losses driven by a long-standing inability to design clothes that appeal to its core customer base.
Questions & Answers
Q.What is the primary reason Esprit gives for its anticipated financial loss?
What is the primary reason Esprit gives for its anticipated financial loss?
Esprit attributes the loss mainly to the impact of Covid-19. This led to a 24-per-cent decline in revenue and substantial impairments on assets, along with provisions for store closures and severance payments.
Q.What actions did North Point Talent Ltd take regarding Esprit's leadership?
What actions did North Point Talent Ltd take regarding Esprit's leadership?
North Point Talent Ltd, Esprit's largest shareholder, initially called for a special meeting to remove the CEO and CFO from the board. This requisition was later withdrawn.
Q.What changes have been made to Esprit's board of directors recently?
What changes have been made to Esprit's board of directors recently?
After North Point Talent Ltd increased its stake, the board appointed Marc Andreas Tschirner, Christin Chiu Su Yi, and Wong Hung Wai as additional executive directors. The existing CEO and CFO retained their positions.
Q.What steps has Esprit taken to reduce its operational costs?
What steps has Esprit taken to reduce its operational costs?
Esprit plans to axe 1100 jobs, mainly in Europe, and close 50 German stores under its court-protected administration. All its Asian stores were closed by the end of June.