Esprit closes 2022 with a heavy loss

Already three weeks ago the clothing supplier Esprit Holdings Ltd. admitted that the 2022 financial year had not been particularly good and, citing preliminary figures, warned of a high loss. On Thursday, the group, which is once again in a state of upheaval, confirmed the advance notification. In the current annual report, Esprit actually had to report deep red figures and a considerable drop in sales.

Annual sales drop by 15 percent

According to the annual report, the year was “very difficult” for the group of companies. In Germany and the rest of Europe in particular, the results were “seriously affected” by the unfavorable economic environment. Group sales fell by 15 percent compared to 2021 to 7.06 billion Hong Kong dollars (827 million euros).

As justification, the clothing supplier cited the consequences of the overall high inflation, the effects of the – as the annual report says – “ongoing conflict between Ukraine and Russia” and in particular the increased energy prices, which the company believes are mainly due to the “excessive dependency Germany’s from Russian natural gas” and put the cost of living under pressure. In addition, according to the group, there were the short-term negative effects of the ongoing restructuring efforts aimed at leading Esprit into a “brighter future”.

High discounts burden the result

In addition to the decline in sales and cost increases, extensive discounts weighed on the result. They were the main reason why the gross margin fell by 7.9 percentage points to 40.7 percent compared to the previous year, the company said. The high discounts were therefore partly used to reduce obsolete inventories in the run-up to the planned relaunch of the brand.

The group slipped deep into the red again. The operating deficit was HK$642 million after an operating profit of HK$416 million in the previous year. The bottom line was a net loss attributable to shareholders of HK$664 million. In 2021, Esprit reported a corresponding surplus of HK$381 million.