Esprit issues profit warning | RetailDetail

Esprit issues profit warning

Esprit issues profit warning

Clothing chain Esprit is sending out a profit warning after disappointing results in the third quarter. A new drop in sales and provisions for the closing of loss making shops will burden the fashion company based in Hong Kong with a substantial loss for the current financial year.

Sales keep declining

The Hong Kong-based company tried looking at the bright side however, stating that for the quarter that ended on 31 March the drop of sales on a comparable base had shrunk to -1.5% (compared to -3.6% during the first half-year 2012-2013). The drop of sales in wholesale is also slowing down: -9.6% in the third quarter, compared to -13.7% in the first semester, mainly thanks to supportive measures.

 

That positive look can however not hide that Esprit is seriously ill: after nine months sales come to 20.27 billion Hong Kong dollar (1.98 billion euro), compared to almost 24 billion dollar (almost 2.35 billion euro) for the same period a year earlier: a drop of 15.5%.

 

Especially in Europe Esprit has its difficulties: sales declined by 8.7% in retail and no less than 17% in wholesale during the past nine months. The Old Continent is still worth over three quarters of company sales. In the region Asia-Australia the drop in sales is limited to -2.2% (retail) and -11.5% (wholesale). In North America, where Esprit closed all of its own locations, sales in wholesale are almost halved (-47.3%).

 

16 more shops to close

Therefore Esprit warns its shareholders for a “substantial loss” across the entire financial year (which ends on 30 June), attributed to a “bigger than expected operational loss” (no numbers are given) and one-off provisions for takeovers of activities in China, the closing of sixteen of its own locations, leases of another 44 onerous shops and an inventory adjustment.

 

Current management says it is still working hard on initiatives for the short and long term to revitalise the company, with a specific focus on product improvement. It can however only conclude that (potential) investors should be careful when trading stock of the company. Not a superfluous warning: when the exchange opened in Hong Kong the share immediately dropped 6.6%.

Questions or comments? Please feel free to contact the editors


Analysis: six reasons major brands are under pressure

17/05/2018

Global brands are increasingly struggling to ward off smaller, local companies. Some even believe the brands’ golden age has passed. That may be presumptuous, but there are some noticeable trends.

Coca-Cola is still strongest global brands, but local brands are on the rise

17/05/2018

Coca-Cola, Colgate and Maggi are the most popular FMCG brands worldwide, according to a Kantar Worldpanel report. Local brands are stealing market share however.

HelloFresh increases turnover forecast

14/05/2018

Mealbox delivery service HelloFresh has increased its 2018 forecast: the German company now expects a 35 % growth, up from its previous 30 % increase forecast. Positive results in the United States, which has become the company’s main market, were the main reason for its adjustment.

Brussels bio chain Färm keeps expanding

14/05/2018

Färm, a bio store chain from Brussels, is supporting a planned expansion with a crowd funding campaign. The chain aims to open its biggest store so far in the North of the European capital, extending its services with a bakery in the store. 

More profit from smaller volumes for AB InBev

09/05/2018

Despite AB InBev’s beer sales dropping 0.2 % in the first quarter, the Belgian-Brazilian beer giant did generate a turnover increase and a gross profit above expectations.

Ahold Delhaize mainly grows online

09/05/2018

Belgian-Dutch merger group Ahold Delhaize has had a decent first quarter, thanks to a Belgian turnaround, a good performance in the United States and strong online growth. Unfavourable exchange rates did spoil the party somewhat.