Local operations return to profit as the clothing company attempts to halve the combined losses of four markets Esprit Holdings' target of cutting the combined losses in four of its retail markets by half next year is a step closer with its biggest loss-maker, Hong Kong, posting a return to profitability for the three months to September. Deputy chairman and group chief executive Heinz Krogner said the clothing retailer and wholesaler's gross profit margin in Hong Kong had improved significantly after it discontinued heavy discounting. '[Hong Kong's] result is a complete swing from minus to plus since we adopted the new strategy in July,' he said after the group's annual general meeting. 'It is the first time in about three years that Hong Kong is back to profitability.' But the initial effect of reducing discounts was a 17 per cent decline in sales volume for its Hong Kong unit, he said. 'We don't mind if people do not come because of less discounts. They should go to some other local guys,' he said. 'We are not a discount store. We are a company selling good-value products and do not overcharge. 'We will see a better growth this month as the weather is getting cooler.' The group has been focusing its effort on rejuvenating its operations in Hong Kong and three other problem areas - Taiwan, Britain and Canada. Compared with Europe's year-on-year 43 per cent growth to $9.8billion in sales last year, its Asian division including Hong Kong only registered 1 per cent growth to $1.6billion. Europe accounts for 80 per cent of its $12 billion in total sales while Asia only contributes about 13 per cent. Other markets such as Australasia and North America contributed about $900 million last year. Today the company operates 500 directly managed stores and more than 2,000 franchised stores in more than 40 countries. ABN Amro said it was told by Esprit management that achieving the target of trimming losses in the four under-performing markets would add $100 million to the group's bottom line for the year to June next year. The brokerage estimated the four markets had suffered losses of $250 million to $300 million. Mr Krogner said he expected sales in Europe to grow by at least 20 per cent this financial year. Its largest wholesale and retail market, Germany, had achieved a sales increase of 10 per cent to 15 per cent for the three months to September, he said. Chairman Michael Ying Lee-yuen said Esprit's United States operation, the clothing group's next big growth market, would take time to develop. He said the group would not accelerate its pace of expansion on the back of rapid US economic growth. 'But we feel more comfortable with our expansion plan,' he said. With net cash of $1.3 billion, the group had earlier indicated interest in acquiring another brand in the medium term. 'Nothing is on the table now. We are still looking around,' Mr Ying said. Mr Ying has cut his shareholding to 33.8 per cent following the sale of 92.5 million shares through placements last month and in May, raising about $1.7 billion. He refused to say whether he would further reduce his shareholding in the company.