Esprit Posts $60 Million Loss Amid European CrisisVinicy Chan and Jasmine Wang
Esprit Holdings Ltd., the Hong Kong-based apparel seller whose two top executives quit in June, posted a wider-than-estimated first-half loss of HK$465 million ($60 million) on weaker consumer demand in Europe.
Revenue dropped 19 percent to HK$13.6 billion in the six months ended Dec. 31, according to a statement from Esprit. The loss was wider than the HK$174 million median estimate of four analysts surveyed by Bloomberg News and compares with net income of HK$555 million a year earlier.
The retailer, which got 78 percent of sales from Europe in the period, has invested in advertising and store upgrades as it faces competition from bigger rivals including Hennes & Mauritz AB, Fast Retailing Co. Ltd. and Inditex SA’s Zara. Esprit raised more than HK$5 billion in a rights offer in November to fund efforts to revive its brand.
“Although the group continues to make progress in the implementation of the transformation plan, it will take time to see the benefits translated into operating results,” the company said in today’s statement.
The stock fell 0.8 percent to close at HK$10.10 in Hong Kong.
The Eurozone crisis damp consumer sentiment and hurt trading conditions in the region, the company said in today’s statement. Sales were also hurt by its store closures in North America and the weaker euro against the Hong Kong dollar during the period, compared with a year earlier, the company said.
The euro-area economy will shrink for a second year in 2013, pushing unemployment higher as governments, consumers and companies curb spending, the European Commission said on Feb. 22.
Esprit lost two executives over 48 hours in June as ex-chairman Hans Joachim Koerber resigned a day after then-Chief Executive Officer Ronald Van der Vis quit.
The departures fueled doubts over the company’s ability to see the transformation plan through. In September, the company appointed Jose Manuel Martinez Gutierrez, a former Inditex SA manager to replace Van der Vis.
Esprit, 11 percent owned by hedge fund Lone Pine Capital LLC, said in 2011 that it planned to spend more than HK$18 billion ($2.3 billion) over four years on efforts to transform the company through more marketing and a larger presence in China.
The company is “fine tuning” the transformation plan without changing the direction, Martinez told reporters in Hong Kong today.
“We have to improve our brand value, we have to improve our products, re-enhance our stores,” he said. “In that sense, it doesn’t make sense to complain about economic environment. We just need to know it is there, but keep going.”