Clothing giant Esprit to shut down all 56 stores in Asia outside mainland China as coronavirus ravages sales
- The Hong Kong-listed fashion house says it will close 56 shops in Singapore, Malaysia, Taiwan, Hong Kong and Macau by June 30, and is ‘winding down’ in China
- Those stores represent less than 4 per cent of global turnover, said Esprit, as it negotiates with landlords across markets for rental relief and better terms
Esprit Holdings will close all its stores in Asia outside mainland China as part of its effort to cope with challenges posed by the coronavirus pandemic.
The Hong Kong-listed fashion house announced on Monday that it will close 56 shops in Singapore, Malaysia, Taiwan, Hong Kong and Macau by June 30. Those stores represent less than 4 per cent of the group’s global turnover, and the closures are part of the company’s “restructuring initiatives to focus resources and recalibrate operations” amid the pandemic, it said.
The coronavirus pandemic has hit the retail sector worldwide as consumers stay at home and shops are forced to temporarily close to control the spread of the disease. Some retail firms have turned to governmental help schemes, while many are asking staff to take pay cuts or unpaid leave.
Others have collapsed, like British clothing chains Oasis and Warehouse, as well as fashion and furnishing retailer Cath Kidston.
“The whole industry has been affected by the global crisis. We first felt the impacts in Asia and now in Europe, where many of our stores have been closed. This is forcing us to look at the contribution all markets make to the group’s performance,” said Anders Kristiansen, chief executive of Esprit Group.
Esprit’s proposed store closures are expected to cost between HK$150 million and HK$200 million in one-off costs, which will have a negative impact on the full financial year ending June 30, 2020, it said in a filing to the stock exchange.
Following the store closures, Esprit said its wholesale and licence business in Asia will continue, as well as its joint venture business in mainland China, and it will focus on its core markets in Europe.
The clothing company, however, said it was “winding down” its business in China.
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Esprit is negotiating with landlords across all markets for rental relief, reductions and better terms “and will terminate stores with rental terms that could not provide viable business performance”, and will also use governmental assistance measures where available.
Meanwhile, executive chairman of the board – Dr Raymond Or Ching Fai – and CEO Kristiansen are forgoing payment during the restructuring period, according to the filing, while the executive management team have taken a 35 per cent pay cut, among other staff pay reductions.
“Apparel is one of the retail sectors which is hardest hit by Covid-19, revenue decline in the sector so far this year is enormous and there is no recovery in sight, not even in China where stores are open again but spending is still significantly below normal levels,” said Imke Wouters, partner at global consultancy Oliver Wyman.
“The apparel market will for sure experience negative growth for the full year and the question is how steep the overall decline will be.
“Many apparel companies globally will be at risk due to strongly negative cash flows and an unsustainable level of debt making it hard to receive additional financing,” she said. “As a result we expect to see many more closures in the coming months.”
In its third-quarter results, also posted on Monday, Esprit recorded a 52.2 per cent drop in revenue from Asia, to HK$140 million (US$18.1 million) in the first three months of 2020 compared with the same period last year. The region’s contribution to group revenue over the same period also fell, from 9.3 per cent to 5.9 per cent.
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Europe’s revenue saw a lesser 22.2 per cent drop, to HK$2.2 billion, while its contribution to the global total increased from 90.7 per cent to 94.1 per cent. Worldwide revenue for the group fell 25 per cent to HK$2.4 billion in the third quarter, compared with the same period in 2019, indicating a struggle for sales.
Esprit has reopened some stores in Germany, Sweden and the Netherlands that it had closed during lockdown, but said it is unable to predict when business will return to normal or how much of an impact the pandemic will have on full-year results.
