Clothing retailer Esprit Holdings Ltd. had no surprises to offer on Tuesday. In its interim report for the first half of 2022, the company confirmed the decline in sales and profits that it had to announce in a mandatory announcement a week earlier.
In the months from January to June, group sales amounted to just under 3.63 billion Hong Kong dollars (461 million euros), which means a decline of 6.4 percent compared to the corresponding level of the previous year. The company, which generates most of its revenue in Europe, reiterated that the decline was mainly due to the depreciation of the euro. Adjusted for exchange rate changes, revenue increased by two percent.
Negative currency effects weigh on sales and earnings
Despite the adverse currency effects, the company was able to post an increase in sales in Europe after business had been impacted by store closures due to the Covid-19 pandemic in the same period last year. In over-the-counter retail and wholesale, Esprit generated sales totaling Hong Kong dollars 2.20 billion in Europe, exceeding the previous year’s figure by 18.3 percent. On the other hand, global e-commerce declined, with sales falling 30.6 percent to HK$1.37 billion. Global licensing revenue grew 30.4 percent to HK$60 million.
Earnings suffered from the decline in sales, higher freight costs and the negative impact of exchange rate developments. Operating profit slipped from HK$164 million in the first half of last year to HK$8 million. Net profit attributable to shareholders fell from 121 to 13 million Hong Kong dollars (1.65 million euros) (-89.3 percent). The company, which had to report losses for years, was able to hold its ground in the profit zone.
The management is sticking to its reform course and the current expansion plans
Despite the recent losses and ongoing difficult framework conditions due to the Russian attack on Ukraine and the current weakness of the euro, the recently renewed management was “generally optimistic” about its future prospects. The company management therefore continues to trust in its strategic reform course, which includes comprehensive cost reductions, for example by closing unprofitable stores and discontinuing product lines, as well as the repositioning of the Esprit brand and the creation of an “omnichannel sales structure with a special focus on e-commerce “ provides.
In addition, the clothing supplier expressly stuck to its growth plans. The company reiterated the “expansion strategy in Asia” unveiled in March and potential re-entry into markets such as Japan, Singapore, Thailand, New Zealand and Australia.