After Esprit announced its net profit had gone down 74%, the group's shares on the Hong Kong stock exchange remarkably went up 25%. Both Esprit itself and analysts call the result “better than expected” and being the result of “a deliberate strategy to reduce wholesale activities”.
Europe at a loss
Esprit's turnover over the last six months of 2011 went down by almost 100 million euro, from 1.71 billion to 1.62 billion. Almost all of this decrease was due to the Wholesale department (738 to 651 million euro), while Retail (964 to 953 million) and Licensing (11 to 12 million) remained almost at the same level.
As almost 90% of Esprit's wholesale activities happen in Europe, it is logical that after a geographical breakdown, the Old Continent sees a similar evolution. European activities went down from 1.36 to 1.27 billion, while Asian (292 to 288 million) and the terminating Northern American activities (64 to 62 million) stayed almost the same.
The market reacted rather positively, as the -74% half year net profit evolution was significantly better than last full fiscal year's -98%. Moreover, this evolution was largely the result of a deliberate choice to slow down wholesale activities – apart from the obvious negative influence of rising prices of raw materials.
The future starts in Antwerp and Düsseldorf
The future is therefore still looking good for the Chinese fashion giant with Californian roots: after 31 March, when the remaining stores in North-America will close as well, the group can look ahead with confidence. The group therefore announced a repositioning of its Esprit brand towards a more expressive and self-conscious style and public.
To make this repositioning more concrete and test the new style, Esprit is opening three concept stores in Belgium and Germany. Antwerp (April) and Düsseldorf (July) will learn from the (largely positive) experiences of the very first concept store in Cologne, where 25% more people visited the store and each spent 54% more than in the old store. Interesting times ahead for the store at the Meir in Antwerp then...