Struggling Esprit axes more stores, 1200 staff
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Apparel chain Esprit will axe 1200 employees globally, including 100 in its Hong Kong office and 800 store employees in Germany as part of its ongoing restructuring program.
A permanent reduction in salaries and benefits will be imposed on all remaining staff, except for those working in stores.
Esprit has received court approval to open insolvency proceedings for its German subsidiaries allowing it to continue with the self-administration process under which it will streamline its business in Europe.
In a filing with the Hong Kong stock exchange, Esprit said Dusseldorf District Court-appointed custodian Dr Biner Baahr, who has worked with Esprit executives since March to complete a restructuring plan, will continue in his role overseeing the plan’s implementation in a process similar to the US’ Chapter 11 restructuring process, called Protective Shield Proceedings.
A creditors’ meeting will be held on August 19 to assess claims made before and during the Protective Shield Proceedings before a vote is held on the percentage of the creditors’ claims which will be paid out.
The job cuts announced this week following the closure of all 56 Esprit stores across Asia, outside Mainland China, this week. Another 50 will now be axed in Germany – stores which accounted for 17.2 percent of the group’s total revenue in the year to June 30.
Another part of the restructuring plan will see contracts with service providers renegotiated to obtain more favorable terms.
Esprit calculates the combined savings from these initiatives will amount to US$116 million, but one-off costs of the restructuring will add up to about $64.5 million in the June 2021 year.
Meanwhile, Esprit says its management team is currently working to strengthen the brand’s purpose, create a “consistent customer experience across all touchpoints,” improving production quality and sustainability credentials and focusing on “full-price sales”.
A further update will be released along with the company’s annual results by the end of September.
Esprit shares are currently trading in Hong Kong at around US 11 cents each.
Questions & Answers
Q.How many jobs are being cut in total, and where are the most significant reductions happening?
How many jobs are being cut in total, and where are the most significant reductions happening?
Esprit is axing 1200 employees globally, with 100 job cuts in its Hong Kong office. The most significant reduction is 800 store employees in Germany.
Q.What is the process Esprit is undergoing in Germany to restructure its business?
What is the process Esprit is undergoing in Germany to restructure its business?
Esprit has received court approval for insolvency proceedings in Germany, allowing it to streamline its business under a self-administration process. This is called Protective Shield Proceedings, similar to the US Chapter 11.
Q.What financial impact do these restructuring initiatives and store closures have on the company?
What financial impact do these restructuring initiatives and store closures have on the company?
The combined savings from these initiatives are calculated at US$116 million. However, one-off restructuring costs are expected to add up to about $64.5 million in the June 2021 year.
Q.What is the next step in the German restructuring process, and who is overseeing it?
What is the next step in the German restructuring process, and who is overseeing it?
A creditors’ meeting is scheduled for August 19 to assess claims before a vote on creditor payouts. Dr Biner Baahr, appointed by the Dusseldorf District Court, will continue to oversee the plan's implementation.
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