Hong Kong-based Esprit is making steady progress in its Transformation Plan launched in September 2011 after reporting an increase in net profit for the year to June 30.
The group’s net profit increased to HK$873 million (US$112.58 million) from HK$79 million (US$10.18 million) in 2011.
Turnover decreased by 10.5 per cent to HK$30.16 billion (US$3.88 billion) from the HK$33.76 billion (US$4.35 billion) recorded in previous year. The overall sales performance was attributable to a decline in both retail and wholesale turnover, amid what it described as a challenging operating environment. The bold decisions as part of the Transformation Plan to close down unprofitable stores, exit the North American market and rationalise wholesale accounts also had an impact.
Gross profit was recorded at HK$15.20 billion (US$1.96 billion) from HK$18.19 billion (US$2.34 billion) in 2011, reflecting a gross profit margin of 50.4 per cent from 53.9 per cent a year earlier. A combination of higher input costs, increase in discounts and higher returns associated with the wholesale support initiatives, caused the margin decline.
Operating profit rose 69.2 per cent to HK$1.17 billion (US$150.89 million) from HK$692 million (US$89.24 million).
Europe accounted 78.6 per cent of the group’s total turnover. According to TextilWirtschaft panel data, Esprit outperformed the German market eight out of 12 months.
Asia Pacific accounts for 18.3 per cent of the group’s turnover, with China the biggest market. In terms of turnover, the China share increased from 7.9 per cent to 8.6 per cent. The China Design Hub, established to inject local designs and styles to cater its collections even better to Chinese consumers, contributed to the good performance.
“As a result of the first year of the Transformation Plan, our operating profit has grown despite the significant spending as part of the Transformation Plan and the challenging operating environment,” said Thomas Tang, CFO of Esprit.
Esprit is now led by Jose Manuel Martínez Gutiérrez as the new CEO after former CEO Ronald van der Vis resigned in June for personal and family reasons. To ensure a smooth transition, van der Vis has agreed to make himself available and provide assistance to the company until December 31.
As part of the Transformation Plan, Esprit successfully closed 64 loss making stores under the 80 store closure program and successfully divested its unprofitable North American retail operations.
The company plans to continue to focus on revitalising collections through the Trend Division, “China for China” lines, the Denim Division and the new Wellness capsule as part of a global campaign featuring Christy Turlington.
The company will also roll-out new store formats and implement a media strategy that sustains high brand consideration levels and improves store traffic.
It will also embark on China expansion, with plans to increase store counts from 1013 to 1900 by 2015.
“The operating environment is likely to remain challenging in the new financial year with the unresolved European debt crisis and the slowdown in China’s economic growth. We will exert vigorous efforts to ensure that the initiatives will produce results at an even faster pace and create an inspiring shopping experience for our customers,” said Raymond Or, chairman of Esprit.
GB
