Esprit reverses huge loss with HK$210m net profit on cost cuts
Apparel retailer forecasts better margins as full year surprises at HK$210m after huge loss
Esprit Holdings shares spiked 9 per cent in early afternoon trading yesterday - the most in almost two years - after it reported better-than-expected annual results.
The apparel retailer posted a net profit of HK$210 million for the year ended June 30, turning around a net loss of HK$4.4 billion a year earlier. The median estimate from 10 analysts compiled by Bloomberg was HK$151 million. Revenue dropped 6.5 per cent to HK$24.2 billion from HK$25.9 billion as the company closed some unprofitable stores.
The Hong Kong-based company also forecast a better profit margin as it would "actively protect the profitability" of its product lines by improving supply chain management, the company said.
However, Esprit's future is still full of challenges, according to Lyncean Securities managing director Francis Lun Sheung-nim. "After jumping 9 per cent, the rise in Esprit shares has narrowed, reflecting [the fact] that investors are better understanding their statistics."
The increase in profit is mainly the result of cost cutting, not from better sales, said Lun. "The competition for a clothing retailer like Esprit will be intense because its branding doesn't help it very much compared with brands like Zara and H&M."
Turnover of Esprit branded products declined 5.5 per cent in Hong Kong dollar terms.