Esprit sales fall again but performance is improving
today Apr 30, 2019
Sales may have fallen again at Esprit in the first three months of the year, but the company seems to think that its restructuring plan is yielding results, although its full recovery is clearly some way off.
Its sales fell 11.6% in local currencies to HK$3.156 billion (US$402.3 million) during the first three months of the calendar year, but with the company having reduced its selling space by 12.4%, such a large drop was only to be expected. And it was the first time since Q1 2017/18 that it had reported sales down by a lesser percentage than the overall cut in selling space.
That might not be the kind of small crumb of comfort that would delight every fashion retailer, but for beleaguered Esprit, it was definitely a step forward.
And it also saw the overall rate of decline falling, with fiscal Q1 (the July-September quarter) having been down as much as 16.2%, while Q2 fell 12.5%. Both of those figures make an 11.6% drop look much more palatable.
A slightly better performance was mainly driven by Germany, which was good news given that Germany is the company’s Biggest single market, accounting for over 49% of its revenues. Sales there fell by ‘only’ 8.6%, which is almost level with the 8.4% drop in selling space. German sales were down 12.2% for the first nine months as a whole.
In the rest of Europe, its local currency sales fell 8% in Q3, even though selling space was down by a wider 11%.
In Asia Pacific, however, the revenue decline was larger, although this was largely due to the company exiting the Australia and New Zealand markets last September as part of its ongoing restructuring process. However, a 35.2% revenue decline in local currencies was still significantly larger than the 29.6% fall in selling space.
Meanwhile, unlike many of its retail peers, its online business isn’t taking up the slack. Digital revenue fell 7.9% to HK$861m. 'Eshop Europe' (comprising Germany and Rest of Europe) made up 96.3% of total online revenue, but saw a 6% on-year decline. Again, Esprit said the rate of decline is narrowing.
The company also said that it remains focused on the execution of its strategy plan to restore it to sustainable growth and profitability and is encouraged by the quarter-on-quarter improvements seen.
But it added that the strategic closure of loss-making stores “will exert pressure on our top-line in the short term, and as other initiatives are still work-in-progress at this stage, it will require time to make the corresponding improvements in brand and product visible to our customers for attracting them back into Esprit stores.”
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