SAR retailer Esprit has completed the last piece in its global jigsaw by buying United States trademark rights to the Esprit brand before an aggressive expansion plan in the world's most competitive marketplace. Investors applauded the strategy announced last Friday and Esprit shares surged 21 per cent to close at HK$13.50 on Monday. However, some analysts wonder if the firm has bitten off more than it can chew. Esprit bought the US and Caribbean rights to the Esprit brand, along with a 37 per cent stake in Esprit International (taking its stake to 100 per cent), which holds all Esprit trademarks outside the US. Chief financial officer John Poon Cho-ming argued a conquest of the US retail sector was central to Esprit's expansion strategy. 'The US is the only market left on our road to become a global company,' Mr Poon said a day before the acquisition was announced. Market-watchers wonder how the SAR retailer will fare in an already crowded market dominated by major apparel retailers such as The Gap and Wal-Mart. Mr Poon said: 'The Gap, one of the biggest fashion brands, takes only a 5.5 per cent market share there . . . I think there is still room for us to grow.' Juan Tseng, an analyst at Deutsche Bank, cautioned that the US had many more specialty outlets than the European market, where Esprit has thrived running franchised operations in department stores. 'There are different players [in the US] and the market doesn't run the same way [as in Europe],' he said. Mr Tseng said the company would decide in the next nine months whether to operate franchised outlets or run its own stores. The betting seems to be the firm will follow its tried and tested European strategy, which relies on 1,300 franchised outlets in department stores compared with 120 directly managed stores. Esprit bought the European operations of Esprit in the mid-1990s. Mr Poon said: 'No matter how much the business grows, you still use the same system to run orders so you can enjoy economies of scale.' He said about 55 per cent of the firm's net profit was contributed by its wholesale business. The problem with franchising is that Esprit operates five-month ordering lead times, while most major retailers employ just-in-time purchasing patterns until seasonal fashion trends are clear. Last year, Mr Poon said the firm introduced a new merchandising process that gave franchisee buyers more flexibility. Under the new system, its European-franchised stores could place up to 20 per cent of their orders as late as four weeks before delivery. To implement the faster order cycle, Esprit has out-sourced half its production to higher-cost European suppliers in Poland and Turkey rather than cheaper Asian factories. 'It is a very critical factor for our growth in Europe,' Mr Poon said. The change brought Esprit into line with the fashion industry trend and increased sales in its European store network by more than 10 per cent in the six months to December 31. The European market has become Esprit's largest profit centre, accounting for more than 80 per cent of last year's combined earnings. In the first half to December 31, the company's net profit grew 41 per cent to HK$385 million.