Esprit expects to post a "substantial" full-year loss

Esprit expects to post a "substantial" full-year loss

Hong Kong-listed casual fashion brand Esprit has said it expects to record a "substantial" loss for the year ending 30 June, blaming one-off costs, weaker sales and a forecast operating loss.

The one-off cost of HKD2.50-2.70bn (US$322.5-348.3m) relates to the under-performance of the company’s operations in China. Esprit’s China business has reported year-on-year turnover declines of 28.3% and 21.6% respectively for fiscal 13/14 and the first half of fiscal 14/15.

Esprit blamed the weak performance on a reduction in "total controlled space", due to its decision to close unprofitable retail stores and the large decline in controlled wholesale space; inventory clearance by wholesale partners; and a challenging operating environment and softer domestic economic growth.

Nonetheless, the necessary restructuring of the operations in China has been completed, and the group is beginning to work on growth development in the country.

Esprit also expects to record impairments of HKD280-300m for store closures and onerous leases, and HKD160-170m in fixed assets of directly managed retail stores.

The company also predicts an operating loss, as a result of higher than expected decline in group turnover, especially during its autumn/winter 2014 season. Esprit said it continues to focus and make good progress in various fronts of its ongoing transformation plan.

"We will continue to work hard to further improve product performance, which is expected to surface progressively in the subsequent financial periods, as the benefits of the new vertical model are optimised over time," the company added.