Esprit returns to profit as Hong Kong office sale offsets waning demand
The Hong Kong-based clothing giant beat analysts’ estimates with full-year earnings of HK$21 million
The Hong Kong-based apparel maker, which generated more than four fifths of its revenue in Europe, reversed its fortunes for the year ended June 30, delivering a net profit of HK$21 million compared with a net loss of HK$3.70 billion a year earlier. That surpassed the consensus among analysts polled by Reuters of a net loss of HK$265 million.
Esprit’s sales dropped by 1.1 per cent from a year earlier to HK$17.79 billion in local currency.
Esprit is positioned in the mid-priced segment, which we see as a competitive disadvantage for the company
Although that’s slightly below the mean forecast of HK$17.81 billion, the company said it’s a sign of some stability returning after four consecutive years of larger declines.
Amid a weak euro and sputtering Chinese and European economies, Esprit has undergone a painstaking structural overhaul, shutting down stores in underperforming regions and revising pricing strategies.
But its recent return to profit is largely the result of a HK$1.34 billion windfall it obtained by selling its Hong Kong office premises and a write-back of tax provisions. The apparel giant said in July the gains would help offset the growing expenses of staff reduction plans as well as the closures of some outlets in Hong Kong and Macau, where consumer sentiment and tourist numbers have fallen.
“We have seen improved sales productivity in European retail operations, but productivity in our Asia-Pacific stores continued to decline,”said chief executive Jose Manuel Martínez in Hong Kong.
