Esprit is to close its Australian and New Zealand stores after years of mounting losses.
The Esprit Australia and New Zealand network comprises 67 directly managed retail stores, including 38 concessions in department stores and 13 discount outlets.
The announcement came just a few hours after the embattled fast-fashion retailer warned shareholders its third-quarter performance was “well below expectation” and several days after it announced it would not renew the lease on its Causeway Bay flagship store.
In a statement to the Hong Kong Stock Exchange, Florence Ng Wai Yin, Esprit’s company secretary, said divesting the ANZ operations will allow management to concentrate efforts and resources in developing other markets in Asia, singling out China, Hong Kong, Taiwan, Singapore and Malaysia, “with profitable growth opportunities for the future” and avoid incurring further losses in Australasia.
In the year to June 30 last year, Esprit Australia and New Zealand reported sales of HK$297 million, (US$37.8 million) which works out at a weekly per-store average of just US$10,850.
It accounted for less than 2 per cent of the group’s total global revenue.
Esprit says closing the stores down will cost between HK$150 million and HK$200 million.
Executive director and group CFO of Esprit Holdings in Hong Kong, Thomas Tang, said the company had undertaken “intensive efforts” in past years to turn the Esprit Australasia business around, to no avail.
Stephen Newnham, director of Esprit Australia and New Zealand described the group’s decision as “unfortunate but unavoidable”.
The company expects to close all of its stores by the end of the year and will continue to honour gift cards until then.
Strategy to be sped up
The closure marks just one step in a promised acceleration of a strategic plan to improve top-line sales and reduce running expenses.
“Given the challenging sales performance in the first nine months of the fiscal year, the group remains cautious about its expectations for the rest of the year,” said company secretary Florence Ng Wai Yin in a stock exchange filing.
Group-wide sales in the nine months to March 31 were down 10.9 per cent year on year, to HK$11.8 billion (US$1.5 billion). The retail selling space was rationalised by 9.2 per cent over the same period.
More worryingly, Esprit’s sales fell 13.8 per cent in the three months to March 31.
Offline retail sales totalled HK$1.404 billion during the quarter, down 17.1 per cent, while online sales fell 11.4 per cent to $1.09 billion.
Yin said the offline sales drop was the result of fewer sales points and unseasonably cold weather in Europe which aggravated the decline in customer traffic to stores.
Online revenue in Asia Pacific declined due to management’s decision to reduce discounting in order to enhance profitability.
