Esprit warns of profit decline

Apparel chain Esprit has wanted shareholders its half year profit to December 31 is likely to be between HK$40 million and $50 million – half the $95 million of the same period a year earlier.

The company said based on preliminary accounting figures, the expected lower net profit is based on falling turnover. This was due to a combination of prolonged unusually warm weather in Europe for majority part of the period, resulting in much lower than expected sales of its autumn and winter products together with special return agreements in China to address aged inventory in the wholesale channel. Although these returns were completed in the first quarter, it impacted on top line performance in the half year.

“Notwithstanding the anticipated lower net profit in the first half of the financial year, the group has continued to devote maximum efforts to significantly improve our products, particularly in terms of design, quality, and value for money, by implementing faster and more cost efficient product development and supply chain processes as part of a vertical business model (New Business Model).

“The New Business Model has been in place since the beginning of this financial year, in July 2014. The Spring/Summer 2015 collections, the first that have been entirely developed under the New Business Model, will arrive at stores from February onward. The products developed under the New Business Model have thus far received a positive response from our wholesale partners.

“While the end consumer response can only be fully tested once the products reach the shop floors, we remain confident of the progress made in our product development,” the company said.

The company will announce its interim results for the six months to December 31 in February.