Crippled apparel group Esprit is to close all its stores in Asia, except those in Mainland China, by the end of June.
The decision follows an appalling slump in sales during the last nine months, which worsened during the March quarter when the Covid-19 crisis hit, forcing retail stores to close or reduce trading across many markets.
All 56 company-run stores located in Singapore, Malaysia, Taiwan, Hong Kong and Macau will close, but the company says the sales through those shops represented less than 4 per cent of group turnover during the nine months to March.
However, the company will continue to operate wholesale and licensing businesses in those markets, suggesting the brand will endure, most likely through department stores and multi-brand stores.
In the March quarter, Esprit sales in Asia were down by 52.2 per cent – 61.3 per cent in its stores and 54.9 per cent at wholesale level. Online sales, however, rose by 13.9 per cent. In contrast, sales across Europe fell by 22.2 per cent, 36.2 per cent at retail level and 22.5 per cent at wholesale. Online sales fell 7.1 per cent while licensing and ‘other’ sales were down 16.7 per cent.
Globally, revenue fell 25 per cent for the quarter and by 18.1 per cent for the nine months to March.
In the nine months to March, retail sales in Asia fell 44.2 per cent, by 48.7 per cent at store level, 45.3 per cent wholesale and 8.1 per cent online.
The company estimates closing its Asian stores will result in one-off costs for severance pay and to exit leases of between HK$150 million and $200 million (US$19 million to $26 million) which will be incurred in the current June quarter.
On the mainland, Esprit reduced its China investment last December. Through a subsidiary called Million Success, it retained a 40-per-cent stake in the Esprit China business, with Hong Kong-based Mulsanne Group holding the balance.
The Asia store decision comes just a month after Esprit placed its six German companies into a form of protective administration to allow restructuring and cull staff numbers under protection from creditors. Once it emerges from that process, and with its Asian business essentially all but gone, the company will focus on Europe with less staff and fewer stores, although whether the crippled, lacklustre brand can survive at all up against the regional powerhouses of H&M and Zara parent Inditex is debatable.
In a stock-exchange filing overnight, Esprit described the Asian store closures as part of a restructuring initiative “to focus resources and recalibrate operations in order to cope with the challenges posed by the pandemic most effectively and efficiently”. However, as the nine-month figures above clearly show, Esprit’s sales were in freefall in the region long before Covid-19 made its appearance.
A key indicator of how dire the company’s position was came in January when its most high-profile recent hire, chief product and brand officer Mia Ouakim, quit after just a year in the role. Ouakim, who had previously worked with high-end brands Burberry and Tommy Hilfiger, left to take up an opportunity outside the company.