Esprit has conceded its strategic initiatives are yet to reignite sales momentum after the Hong Kong-listed fashion group revealed lower revenues and a net loss in it last financial year.
The continued growth of e-commerce and the intensification of price competition driven by digital pureplays weighed on Esprit’s results in the 12 months ended 30 June, as the company continued to be affected by the rapidly-evolving retail industry.
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The pressure was further aggravated by a drop in customer traffic into the company’s retail stores, both online and offline, which led to an 11.1% year-on-year decline in revenues to HK$15.45bn (US$1.97trn) from HK$15.94bn a year earlier.
These negative developments, together with a number of non-recurring provisions and impairments totalling HK$1.34bn led to a disappointing result for the company as it moved to a loss of HK$2.5m from earnings of HK$67m.
In its trading update, executive chairman Dr Raymond Or acknowledged the results were “far from satisfactory” and that the situation has challenged the board and company directors, despite strategic initiatives to “recharge the potential of the group”.
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“We concede that the progress to date has yet to reignite sales momentum or translate into a positive financial performance,” he said. “The group is currently in the midst of undergoing a thorough assessment to address this situation and develop corrective measures to ensure a successful turnaround.”
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By GlobalDataCEO Anders Kristiansen, who joined Esprit in June, has commenced efforts to establish “ambitious medium to long-term goals”, the chairman added, and is working vigorously on an updated strategic plan expected to be finalised this autumn. The focus will be on sharpening brand identity, creating an inspiring omnichannel shopping experience for customers, and launching stylish and geographically adapted collections to improve sales per square meter productivity.
Esprit says it will also continue to leverage on the newly-installed dual product engines organisation, whereby the main line focuses on catering to existing customers in core markets, and the fast-to-market line aims to introduce trendier products for the online and Asia markets, particularly China.
“While we see the journey to reinvigorate the Esprit brand to be long and challenging, we believe that ultimately it will be rewarding,” the chairman added. “Looking ahead, the operating environment will likely remain challenging in the upcoming financial year with the fallout from the trade war and rising interest rates, which may weigh on consumer sentiment and spending. Nevertheless, we now have the leadership in place and the funds to deliver on our objectives as we make a concerted effort to recapture market share and, ultimately, return the group to growth.”
