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Esprit posts H1 net loss of 954 mn Hong Kong dollars on weak sales

By Prachi Singh

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Management

Esprit Holdings Limited, for the six months ended December 31, 2017 reported revenue of 8,039 million Hong Kong dollars (1,027 million dollars). The reported year-on-year decline of the group revenue was 9.6 percent in local currency, while the revenue decline was 3.4 percent in Hong Kong dollar terms. The company reported a net loss for the group of 954 million Hong Kong dollars (121.8 million dollars).

At a press conference in Hong Kong, Jose Manuel Martínez, Group Chief Executive Officer of Esprit, said: “Interim results of the group are below our expectation, mainly due to weaker than expected sales performance of our brick and mortar retail stores in the second quarter of the financial year, where we observed decreased customers traffic. However, management is clear that further rationalization of our controlled space must continue and it must be compensated by increasing sales performance both in the remaining brick and mortar stores and online business.”

Highlights of Esprit’s first half

Other financial metrics, the company said, are developing positively and in line with guidance. Gross profit margin improved by 0.4 percent points. But the improvements in gross profit margin and operating expenses, Esprit added, were not sufficient to outweigh the negative impact of revenue decline. Consequently, the underlying operations recorded a loss of 136 million Hong Kong dollars (17.3 million dollars) compared to 2 million Hong Kong dollars (0.2 million dollars) in the first half of FY16/17.

“It is important to highlight that the majority of this net loss is related to the impairment of our China Goodwill and Customer Relationships of 794 million Hong Kong dollars (101.4 million dollars) due to the relevant reduction of our business in the country in recent years. This has no impact on our operational performance and our cash balance. In fact, the group’s net cash position was strong and healthy at 4,575 million Hong Kong dollars (584.5 million dollars) as of December 31, 2017,” added Thomas Tang, Group Chief Financial Officer of Esprit.

Esprit to focus on developing business in Europe and China

Moving forward, the company said, Esprit will continue the necessary rationalization of its distribution and keep a primary focus on increasing sales productivity in offline and online channels and in order to maximize their impact, management is developing each initiative with specific solutions for two different areas of the business: the core business focused on European markets and the new businesses with a specific focus on China.

For the core business, the main goals will be to stabilize sales performance by shaping product collections strictly to the demands of the current core consumers group and to maximize profitability by rapidly improving the efficiency of existing operations. Regarding new businesses, the goal will be developing new product lines, under a fully vertical model, totally devoted to our online channels and to a new generation of consumers, especially in the China.

Picture:Facebook/Esprit

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