Arab Today, arab today esprit shares plunge as firm admits it lost its soul
Last Updated : GMT 19:33:03
Arab Today, arab today
Arab Today, arab today

Esprit shares plunge as firm admits it lost its soul

Arab Today, arab today

Arab Today, arab today Esprit shares plunge as firm admits it lost its soul

London - Arabstoday

Esprit Holdings plunged the most in more than 13 years after the clothing retailer said its brand had \"lost its soul\". It has slumped about 33 per cent since Hong Kong\'s biggest listed clothing chain yesterday reported a 98 per cent drop in annual profit. \"We\'re paying the price now\" for having focused on short-term gains, CEO Ronald Van der Vis said in an interview.\"We had lost sight of the customer. We started to neglect the brand.\" The casual clothing maker\'s revenue fell for the third year in a row in Eur-ope, where it made 79 per cent of sales. Esprit will accelerate expansion in China, revive earnings growth in other main markets including Germany and France, where it\'s shutting stores, and sell its unprofitable North American operations, Van der Vis said. \"Esprit\'s products are no longer trendy and fashionable,\" Gabriel Chan, an analyst at Credit Suisse in Hong Kong, who cut Esprit from \"neutral\" to \"underperform,\" said in an interview. \"What Esprit really needs to do is to improve products and adjust its price points.\" Net income dropped to HK$79 million (Dh36.7 million) in the year through June from HK$4.23 billion in the previous period, the third consecutive annual decline. Profit excluding exceptional items fell 30 per cent to HK$2.35 billion. \"The recovery pace was slower than expected, especially in Europe, as consumer spending and sentiment was negatively impacted by rising inflation and austerity measures,\" the Hong Kong-based company said in its earnings statement. Esprit said it plans to close 80 outlets, including 24 in Germany and 12 in France. \"The brand has gradually lost its soul over the past few years,\" Esprit said in its filing. \"The heritage of the brand has been neglected and the company lost its customer focus.\" Esprit is facing increased competition from Inditex SA\'s Zara and Hennes & Mauritz AB\'s H&M. Inditex\'s fiscal first-quarter net income rose 10 per cent to €332 million (Dh1.66 billion), beating analysts\' estimates, as it added new stores. Hennes & Mauritz said August sales were better than analysts anticipated. \"The market is worried about Esprit\'s profitability in the next two years,\" Hayman Chiu, an analyst with Cinda International Holding in Hong Kong said in a phone interview. \"The divestment of North American business may not help much.\" The clothing chain forecast an operating profit margin of 1 per cent to 2 per cent for the year ending June 2012. That \"implies close to zero net profit for 2012 and greatly reduces the potential for a reasonable dividend yield,\" said Aaron Fischer and Mariana Kou, analysts for CLSA Asia-Pacific Markets who recommend selling the stock. Esprit, which hired the brand director and creative director of Hennes & Mauritz AB\'s H&M to rejuvenate its fashions, plans to spend HK$6.8 billion (Dh3.2 billion) on branding over the next four years. It will focus its efforts in Germany, France, Belgium, the Netherlands and China, according to a company presentation. Ronald Van der Vis is setting up a team of designers in Paris to be \"closer to the pulse of fashion\" and said he also wants a design team in China. Esprit plans to spend HK$6.8 billion on branding over the next four years, focusing its efforts in Germany, France, Belgium, the Netherlands and China.

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