The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
HONG KONG, China — Esprit Holdings Ltd., the clothing retailer rebuilding its brand, forecast a return to profit in the six months ended December after cutting costs.
The company’s shares surged as much as 5.7 percent, headed for the biggest gain in more than two months. Esprit expects to post a “slight profit” for its fiscal first half, compared with a loss in the same period a year ago, it said in a filing today. Business during the six-month period that ends in June is normally weaker, it said.
The casual clothing retailer in September predicted a return to profitability in the fiscal year ending June, after reporting its first annual loss since a 1993 listing amid a revenue slump and competition from Inditex SA's Zara and Hennes & Mauritz AB. The clothier has cut money-losing retail stores, unproductive product lines, unprofitable wholesale business and exiting countries where it was incurring losses.
“This is very positive for the company,” Chris Zee, a Hong Kong-based retail analyst at HSBC Holdings Plc, said in a phone interview. He estimated Esprit will post a profit of HK$70 million ($9 million) to HK$100 million for the period. The clothier posted a loss of HK$465 million in the previous fiscal period, according to data compiled by Bloomberg.
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The company said its forecast profit is largely because of the reductions in operating expenses.
Challenging Environment
Esprit climbed as much as 5.7 percent, headed for the biggest gain since Nov. 11, to HK$16.60 before trading at HK$16.36 as of 9:37 a.m. in Hong Kong.
“The operating environment remains challenging,” Esprit said in today’s statement. “The financial performance of the group in the second half of fiscal 2013/2014 remains uncertain.”
Weaker consumer demand in Europe has dragged down the clothier’s sales, where revenue dropped 19 percent to HK$13.6 billion in the six months ended Dec. 31 last year.
Two top executives quit in 2012 for “personal reasons” as the company struggled to recover from an earnings decline.
Esprit had its highest annual profit, HK$6.45 billion, in the fiscal year ended June 2008, according to data compiled by Bloomberg. The company in 2011 reported profit that fell 98 percent and said its brand had “lost its soul over the past few years.”
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