Esprit Won’t Meet Plan for HK$1 Billion Annual Savings by 2015
Esprit Holdings Ltd. (330), the Hong Kong-based apparel seller that last year lost two top executives, said it won’t save HK$1 billion ($129 million) per year by June 2015 as planned as its performance isn’t meeting expectations.
The savings targets and other projections laid out under a transformation plan announced in 2011 are “no longer applicable,” Chief Executive Officer Jose Manuel Martinez Gutierrez said on a webcast. The plan was rolled out by the company’s previous CEO Ronald Van der Vis.
The company this month forecast a “substantial” annual loss on store closures and a drop in the value of goodwill. The clothier has invested in advertising and store upgrades as it faces competition from rivals including Hennes & Mauritz AB (HMB), Fast Retailing Co. (9983) and Inditex SA (ITX)’s Zara.
Esprit plans to cut expenses and focus on improving profitability in 6-12 months, Martinez said.
Esprit aims to improve its business and distribution by cutting loss-making retail stores, unproductive product lines, unprofitable wholesale business and exiting loss-making countries, Martinez said today. It is also targeting keeping operational expenses below 50 percent of sales, he said.
The company expects a further fall in sales in the fiscal year ended June 2014 as it shuts more stores and a recovery in business to begin over fiscal 2015, Martinez said today.
Esprit lost two executives in 48 hours in June. Former Chairman Hans Joachim Koerber resigned a day after then-Chief Executive OfficerVan der Vis quit. The departures fueled doubt over the company’s ability to see its transformation plan through. Van der Vis was replaced by Martinez.
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