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Feb 27, 2013
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Esprit first half losses wider than forecasts and will see no quick improvement

By
Reuters
Published
Feb 27, 2013

HONG KONG - Europe-focused retailer Esprit Holdings Ltd reported a far steeper-than-expected loss for the six months ended December as the region's economic gloom slashed sales, and its new chief said the next six months were likely to be just as grim.

The clothing and accessories firm has shut its stores in the United States and relies on the euro zone for 80 percent of its turnover, plus a costly restructuring is not yet complete.

Spring-Summer 2013 (photo: Esprit)


"We do not anticipate significant improvement in the operating environment in the second half of the financial year," Esprit said in a statement.

"All in all, and still under quite an uncertain economic environment, the group does not foresee considerable improvement in the top line and profitability in the second half of the financial year."

Its first-half loss of HK$465 million ($60 million) was much greater than market expectations of around HK$110 million according to five analysts polled by Thomson Reuters, and compared with net profit of HK$555 million a year earlier.

In August, Esprit hired Jose Manuel Martinez Gutierrez from Spain's Inditex S.A., which owns the popular and profitable Zara clothing chain, as Chief Executive. The move was intended to reassure investors about the firm's direction.

"We expect it to take some time to make these improvements visible to our customers and to see the benefit translated into operating results," Gutierrez said in a statement on Wednesday.

Esprit, whose rivals include Swedish clothing retailer Hennes & Mauritz AB, U.S. group GAP Inc as well as Inditex, said it will focus on cutting costs and inventory levels in the second half of the fiscal year.

First half turnover was HK$13.55 billion, down 18.8 percent from HK$16.7 billion a year earlier, in part a result of it closing all of its American stores.

Like China's best-known sportswear company Li Ning Co Ltd , Hong-Kong listed Esprit is battling to revamp its brand and refresh its management team in a sector weighed down by high inventories and slack demand in a slowing global economy.

In December, the struggling firm warned that it might post a loss for the six months ended December.

The profit warning triggered a raft of broker downgrades.

Shares in the company, which has a market value of $2.5 billion, rose 16 percent in 2012, lagging a nearly 23 percent gain in Hong Kong's benchmark Index.

The stock, which rose 1.2 percent on Wednesday morning, fell more than 3 percent in early afternoon trade, compared with a 0.3 percent gain in the benchmark index.

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