Esprit H1 results fall as expected, but it promises stronger second half

Esprit’s profit warning earlier this summer meant expectations for its first-half results weren’t very high. But despite lower sales and profits, the company said its “dynamic initiatives” will “fuel remarkable growth” in the second half.

Before we get on to those initiatives, let’s look at those H1 figures. In the six months ended 30 June, its performance was “adversely impacted by the challenging global economic conditions and the ongoing conflict in Ukraine, which had a significant influence on consumer sentiment throughout Europe”. 

The negative effects were increased by the company’s “short-term adjustments stemming from brand elevation and repositioning in the fashion industry. These strategic changes, while necessary for long-term growth, played a role in the lower-than-anticipated results”. 

What that all boils down to is total revenue falling 17% to HK$3.25 billion (€383m/£328m/US$414m) and a gross profit margin of 44.7%, down 1.1%. But it added that the group remained essentially debt-free and recorded cash, bank balances and deposits of HK$1.3 billion at the end of the period. 

Looking further at the figures for the first half, gross profit fell to $1.35 billion from $1.66 billion and the operating loss was $703 million, a sharp swing from the $8 million profit of a year earlier.

The pre-tax loss was $718 million, worse than the $12 million loss of the previous year and the net loss was $714 million, down from a $13 million profit in the year ago period.

Revenue from retail and wholesale fell to $1.8 billion from $2.2 billion with revenue from the e-shop down to $1.09 billion from $1.36 billion.

Pak William Eui Won, who’s executive director, CEO and COO, said: “Over the past six months, the group has implemented a range of progressive initiatives aimed at revitalising its growth. Management remains optimistic about the anticipated outcomes of these initiatives, expecting them to yield tangible results during the second half. Encouraging signs have already emerged from the June results. Moreover, the group has an exciting array of upcoming events in the second half. These dynamic endeavours are expected to not only strengthen the group’s market position but also propel its overall success to new heights.” 

LOOKING AHEAD

So just what are these new initiatives? The company “continues to fortify its presence in both the US and international markets”. It has several American retail store openings under way for launch in the latter half of 2023 in key cities, such as permanent stores in Los Angeles, New York and Vancouver, and pop-ups in Chicago, Los Angeles and New York. 

In Europe, the retail team is “developing shop-in-shops under a brand new elevated concept within 20 of Esprit’s best European retail and franchise locations. These have been instrumental in creating buzz and reinstating Esprit’s prominence on a global scale,” we’re told. 

In digital, it says it will “revolutionise the online customer experience with a simplified and innovative technology platform”. It’s already live in South Korea, and will launch in the US by Q3, followed by its launch in Europe by mid-2024. 

The digital team is also “working on developing a modern data stack, to be completed by mid-2024, which seamlessly connects customers and products. By harnessing the power of artificial intelligence and large language models, Esprit aims to solidify its leadership position in the industry, providing unparalleled customer engagement and satisfaction”. 

Meanwhile in omnichannel, it’s “embracing cutting-edge technology and implementing best industry practices to elevate customer experience”. With a focus on “stores-of-the-future”, it aims to “provide digital and hyper-personalised service experiences” for upcoming Flagship and Experium stores. 

And on the product front, it’s unveiled a new collection with highlights including a new denim line developed at the group’s innovation centre in Amsterdam. Additionally, there will be a launch of an in-house-developed kidswear line.