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Sandy Li

Arch-competitor Esprit, meanwhile, is making arrangements to establish itself further in Asia as part of global aspirations

Casual clothing retailer Giordano International  is planning another march on Europe, seeking to expand its business and earnings despite a failed foray into Germany two years ago.

The move comes as its major European competitor, Esprit Holdings,   expands in Asia.

Giordano chairman Peter Lau Kwok-kuen  said  the firm had learned from its mistakes in Germany and would  use a different strategy to penetrate wholesale markets in Europe instead of opening a chain of retail stores.

The same strategy will be used when the company launches in the United States at a still-to-be-announced date.

Mr Lau rejected  the suggestion that Giordano's new strategy was a copy of Esprit's successful wholesale model,  saying Esprit had been established in Europe for more than 20 years.

In contrast, he said, Giordano was a purely Asian retailer, with 1,363 stores in 15 markets carrying four brands: Giordano, Giordano Ladies, Giordano Junior and Bluestar Exchange. It has 581 outlets on the mainland, 195 in Taiwan, 172 in South Korea, 75 in Hong Kong and others in the Philippines, Australia, Thailand, Brunei and Singapore.

'Yes, we once failed [in Europe] ... but we feel that it's now time for us to go back. We don't fear entering any market,' Mr Lau said.

The group, he said, was confident of making  it in European wholesale markets and eventually in the US - and avoiding the mistakes of the past.

'I hope we can return to Europe and go into the US in one or two years. But discussions with parties in both places are still in a very preliminary stage,' he said.

In September 2002, Giordano abandoned its only European venture, in Germany, following a dispute with former partner SB Warenhaus. The joint venture shut down all 23 outlets of budget clothing retailer Bluestar Exchange,   forcing Giordano to write off $10 million.

The Asian economic downturn and Sars also hit Giordano's fortunes, with  net profit falling 18.9 per cent to $266 million last year -  its lowest  since 1998.

Giordano's desire to become a global brand, thereby increasing earnings, is driving the plan to re-establish its presence in Europe, and its foray into the US.

Esprit, which listed in Hong Kong in 1993 and has a long-term plan of becoming a truly global operation, had $12 billion in turnover  in the past financial year,  with 59 per cent coming from its wholesale business in Europe, particularly Germany.

Esprit took over from Giordano as the largest retailer   in Hong Kong when it entered Europe in 1997. Within a year, its sales soared from $3.35 billion to $5.08 billion.

In the past financial year, Esprit's net profit hit a 10-year high of $1.18 billion, with a 53 per cent jump in interim profit to $886 million for the six months to December. This compared with Giordano's full-year profit  of $266 million.

Some analysts say Giordano's drive into Europe is inspired by Esprit's success but that the move will be easier said than done.

DBS Vickers Securities analyst Alice Poon said Giordano would have to expend more effort than Esprit to build up its brand name in  European and US wholesale markets. 'Esprit already has a strong brand in both places and, therefore, enjoys a huge competitive advantage over Giordano.'

Bonnie Lai, an analyst at Core Pacific-Yamaichi, said the beauty of the wholesale model was that it gave an extensive channel throughout the continent without heavy capital commitment.

'It's worth trying as the expansion will not affect Giordano's existing business. The break-even period should not be long,' she said.

Last month, Esprit deputy chairman Heinz Krogner    said the fashion retailer would expand its Asian operation, which only accounted for 13 per cent of the $12 billion total sales last year against 80 per cent in Europe.

Mr Krogner said Europe's population was shrinking and getting older, while Asia was full of energy and dominated by a younger generation with rising incomes.

'Europe's market is like a 50-year-old man and the US similar to a 40-year-old man, while Asia is like a 10-year-old boy with lots of potential to grow,' he said,  conceding that having a Europe-dependent business was not ideal.

'So our mission is to grow Asia faster than Europe, or else we will become a European company which we don't want to be. We want to be an international company and we need to balance our markets,' he said.



Giordano maps European drive