The financial year 2010/2011 has been the worst achievement for fashion chain Esprit in the last eight years. The Hong Kong based group saw its net profits plummet 98% and seems certain to divest its North American operations, deemed unprofitable. Esprit would also leave three European countries completely.
Exit from US, Canada, Spain, Sweden and Denmark
The chain announced its intentions to close 80 unprofitable stores in Europe and Asia, including all its stores in Spain, Sweden and Denmark. Moreover, Esprit is looking to completely leave its “home territory” North America, where the chain was founded in 1968. It is still unsure whether Esprit will close or sell their almost 100 North American stores, the solution depending on buyers' interests.
The massive store divestiture was confirmed as Esprit announced its net profits had vanished in the last financial year, crashing from 4.23 billion to 79 million Hong Kong dollar (3,125 to 7.3 million euro). Analysts had expected a decrease to 3.16 billion HK dollar (293 million euro, or -26%), but apparently hugely overestimated the chain's performances.
"Neglecting the brand heritage"
In the financial year 2010/2011, ending 30 June 2011, Esprit's turnover grew marginally by 40 million HK dollar (4 million euro) to 33.77 billion HK dollar (3.129 billion euro). CEO Ronald Van Der Vis expressed concerns turnover for the current financial year might drop by as much as 5%, but remains hopeful for the future. “In essence, Esprit is a strong and profitable brand, but the brand has gradually lost its soul over the past few years,'' he said, claiming that "the heritage of the brand has been neglected and the company lost its customer focus.''
Leaving North America for good, Esprit will now focus on Eurasia – and China in particular. The group will invest 1.6 billion euro (18 billion HK dollar) in a “Transformation plan 2014/15”, including the opening of 200 new franchise stores and the complete renovation of all its own stores. Apart from China, the group's main focus will be the Benelux, France and Germany.