Esprit swings to H1 loss as sales fall

Fashion retailer Esprit has posted a 17 percent drop in sales and swung to a loss in the first half of the year, but remained upbeat about its ongoing turnaround strategy.

The Hong Kong-based company generated revenue of 3.03 billion Hong Kong dollars (around 356.6 million euros/385.5 million dollars) in the six months ended June 30, as it faced “adverse conditions” and implemented a “series of progressive initiatives to reinvigorate growth”.

In the same period, the company swung to a net loss of 714 million Hong Kong dollars (84.2 million euros/91 million dollars) from a profit of 13 million Hong Kong dollars (1.5 million euros/1.7 million dollars) the prior year.

Esprit has undergone a major transformation in recent years following an extended period of lacklustre trading.

In the past two years, it has relocated its headquarters back to Hong Kong and announced a shake-up of its leadership team, including a new CEO, CFO, chief product officer, and chief digital and marketing officer.

Ongoing headwinds

The company said it faced a variety of difficulties, including international supply chain disruptions, increasing raw material prices, declining consumer confidence, lower discretionary spending, and escalating geopolitical tensions.

It noted that German and wider European consumer confidence and spending remained constrained in the first half linked to the on-going Ukraine conflict as well as high inflation and interest rates.

However, it said it implemented “a series of progressive initiatives”, which management expects to come to fruition in the second half of 2023 after seeing “noticeable positive developments from the June results”.

These actions include cost-cutting measures through corporate restructuring; closing unprofitable stores, outlets, and reducing store size; terminating product lines that have low gross profit margins; and investing in re-establishing and improving Esprit’s brand image.

Looking ahead, the company said it has specifically identified North America as its focus for future expansion to diversify the business.

It will also continue “strengthening its presence in the Asian and European markets, with the aim to return Esprit to its original, elevated, and globally recognized brand position”.