Fashion concern Esprit has managed to become profitable again: it had a 4.388 billion Hong Kong dollar (440 million euro) loss in fiscal year 2012/2013, but managed a 210 million dollar (21 million euro) profit in fiscal year 2013/2014.
Turnover keeps dropping
The turnaround was not because of better commercial results, as Esprit's worldwide turnover keeps dropping. The group managed a 25.902 billion dollar (2.6 billion euro) turnover in 2012/2013, but it dropped 6.5 % to 24.227 billion dollars (2.4 billion euro) in 2013/2014.
That comes as no surprise as Esprit is still in a transformation phase during which it has backed out of the American market and made cuts elsewhere. It had closed down 108 own stores, which leaves it with 855 stores worldwide. In Belgium, Esprit closed down one store and has 28 left. It also pulled out of a number of multi-brand stores. Combined sales space dropped 10.7 % last year.
Cut down in operational costs
Esprit still managed to present decent financial results through serious cost-cutting. In local currency, it lowered its operational costs 32.6 %, in dollars it even reached 30.6 %. It also lowered its supplies.
The improvement is good news for Jose Manuel Martinez Gutiérrez, who was brought in from Inditex to get Esprit back on track. "We have to stabilise our own business before we can rebuild again", he said.
Esprit continues reorientation
He also wants to reorient the chain: it has to deliver a better price-quality and the shopping experience has to improve. He sees a lot of room of improvement to create better products. "It will take considerable time before the consumer picks up on this", the new CEO said.
Up until now, Esprit had launched with high prices and then lowered the prices, but it will change that strategy now. The new CEO wants to keep prices lower from the start, to better compete with stores like H&M.
Esprit's further transformation will still weigh heavily on the company's results for the coming 12 months, "but we have no choice", he said. Esprit has given itself 4 years to complete the transformation.