Gross margin growth helps Esprit produce first profit in five years

After flagging an expected return to profitability for the full year earlier this month, Esprit on Wednesday announced its final results and said that revenues rose to HK$8.3 billion (€953m/£808m/US$1bn) in 2021.

It didn’t give a comparable revenue figure but said that net profit surged “significantly” to $381 million. The company had made a $414 million loss in the final six months of 2020, the closest comparable period after it changed its financial year-end date.

Revenue in the year was affected by lockdowns in the company’s major European markets in Q1 and further restrictions in Q4, but the group still generated strong revenue across all three of its channels combined (e-commerce, wholesale, and owned retail stores).

Of course, a big chunk of sales came online — both its own and third-party sites — during lockdowns, helping it to make up for some of the negative impacts as far as physical stores were concerned. Another driver of growth came from selling fewer discounted products from the company’s retail business compared to 2020.

Looking ahead, it expects to be negatively affected by the “lingering effects of the pandemic and the conflict in Ukraine”. The “already unstable logistics industry and disrupted supply chain” will also likely be further issues that will result in higher costs.

But it believes it’s “on track to ongoing profit growth” nonetheless.

CEO and COO Pal William Eui Won said: “The remarkable results are definitely a testament to the company’s collective efforts by devoted staff at Esprit, including the successful migration of selected strategic functions from Germany back to Hong Kong, Esprit’s new global headquarters.

“Combining expertise from the two offices has created a stronger organizational balance and workplace synergy. It is also evident that the current management team has crafted the correct infrastructure to re-establish Esprit to become a market leader. We will continue to strengthen it by becoming a truly omnipresent brand and enhancing our product portfolio that fits with the company’s mission of making our customers ‘feel good to look good’.”