• Home
  • Executive
  • Management
  • Esprit posts net profit growth in FY16/17 but revenues drop 8.7 percent

Esprit posts net profit growth in FY16/17 but revenues drop 8.7 percent

By Prachi Singh

loading...

Scroll down to read more

Management

For the year ended June 30, 2017, Esprit reported a net profit of 67 million Hong Kong dollars (8.5 million dollars), representing an improvement in the group’s results against 21 million Hong Kong dollars (2.6 million dollars) reported for FY15/16. The company said, this improvement was primarily driven by the performance of the underlying operations with EBITDA and LBIT from underlying operations improving by 307 million Hong Kong dollars (39 million dollars) and 386 million Hong Kong dollars (49 million dollars) respectively.

Commenting on the company’s results, Jose Manuel Martínez, Group Chief Executive Officer of Esprit, said in a media statement: “FY16/17 has been a year of good progress and marks the completion of the strategic plan that was announced in 2013. The new model implemented for product (based on best practices from vertical retailers) and for our channels (based on an omnichannel approach) has proven instrumental in stabilizing the Group financially and operationally.”

Esprit revenues decline 8.7 percent in FY16/17

Revenue of the group for FY16/17 amounted to 15,942 million Hong Kong dollars (2,041 million dollars), representing a decline of 8.7 percent in LCY, in line with the corresponding reduction in total controlled space of 8.5 percent.

However, the company added that group’s gross profit margin increased to 51.6 percent, a 1.4 percent points from last year, despite the drag from a lower proportion of retail excluding eshop revenue and the weakness of the euro for the most part of the financial year.

“Despite difficult operating conditions in the industry, we are encouraged by the continuous improvement in profitability from our underlying operations, driven by closure of unprofitable space, commercial actions to protect our gross profit margin, and decisive reduction of operating costs in FY16/17,” said Thomas Tang, Group Chief Financial Officer of Esprit.

The group’s regular OPEX (excluding exceptional items) also improved to 8,416 million Hong Kong dollars (1,078 million dollars), representing a reduction of 9.9 percent in LCY.

Esprit to close unprofitable stores to drive growth

Esprit expects that its stronger position - both in financial and operational terms, is better poised to capitalize on opportunities. In the very short-term, the group will continue its downsizing efforts, closing the most unprofitable stores. The move, Esprit said, will pose pressure on the group’s topline, but that pressure is expected to be partly alleviated by business expansion and space productivity improvements.

Overall, the Group’s revenue is expected to see a modest decline in FY17/18, to be offset by a slightly higher gross profit margin and a further decrease in operating expenses, which should outweigh the revenue decline to produce a similar improvement in EBIT (excluding exceptional items) as experienced in FY16/17.

Dr. Raymond Or, Chairman of Esprit further added that looking ahead to FY17/18, the company expects the overall operating environment to remain challenging.

Picture credit: Esprit

Esprit