Esprit profit misses forecasts, shares fall 8pc

Retailer Esprit Holdings posted a jump in full-year net profit after store closure-related costs were less than expected but missed analysts’ forecasts as a slowing global economy weighed on sales, sending its shares plunging 8 per cent.

Esprit, which sells everything from bed sheets to jeans and generates three-quarters of its sales in Europe, has been trying to restructure its business as it struggles with a slump in demand due to the euro zone debt crisis.

The retailer in August hired an executive from Zara owner Inditex as its new CEO, reassuring investors about the company’s restructuring drive following uncertainty after a management reshuffle.

“Looking ahead, the macro environment in FY12/13 continues to present challenges and uncertainties, such as slowing economic growth in China and the unresolved European debt crisis,” Esprit said in a statement, adding that it would continue this year to implement its turnaround plan “rapidly and consistently.”

Esprit, which competes with Swedish clothing retailer Hennes & Mauritz and Spain’s Inditex, reported a net profit of HK$873 million (US$112.6 million) for its fiscal year ended in June, missing the average estimate of HK$1.01 billion in a poll of 10 analysts by Thomson Reuters.

The result was higher than the HK$79 million profit posted a year earlier when the company took a one-time charge of HK$2.3 billion to set aside provisions for the closure of stores. The overall closure costs were less than expected and the company was able to write back HK$696 million of those provisions in the latest term.

Turnover fell to HK$30.17 billion from HK$33.77 billion a year earlier, due to the sale of its North American operations, store closures and a tough business climate, it said. Retail turnover fell 6.1 per cent in local currency terms and wholesale turnover dropped 16.5 per cent.