Hong Kong-listed Esprit says coronavirus-driven store closures in Europe could lead to considerable loss in first six months this year

Eric Ng

Hong Kong-listed fashion distributor Esprit Holdings, which relies on Europe for most of its sales, said on Monday that, with retail sentiment at its “lowest level possible” because of the Covid-19 pandemic, it faced a “considerable” loss in the first six months this year.

The company, which had 389 retail stores and about 4,800 wholesale distribution points at the end of last year, said it was badly hurt by shop closures ordered by governments across the continent.

“Since the outbreak of the pandemic, many countries have implemented public health measures and taken drastic actions … [resulting] in the closure of a significant number of stores in France, Italy, Spain, Poland and Austria, with other European countries most likely to follow,” the company said in a filing to the city’s stock exchange after market close.

“Apparel retail sentiment is at its lowest level possible and store traffic in the group’s retail stores and its partners’ points of sale has subsided entirely,” it said. “The logistics of the supply chains of merchandise shipments are significantly affected.”

The company’s statement on Monday marked a change of tone from three weeks ago. “The management is pleased with the trajectory of the group’s financial performance and believes the group is on track to deliver what the strategic plan set out to achieve,” it said at the time, even as it acknowledged the virus would mean “challenging” retail conditions in its core markets.

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The pandemic adds to the company’s woes. Esprit posted a net loss of HK$331 million (US$42.6 million) for the six months to December 31, which is an improvement on the HK$1.74 billion loss reported in the same period in 2018.

Germany accounted for just over half of Esprit’s revenue, while the rest of Europe took up about 40 per cent. Asia represented just 7 per cent of its total sales. The company attributed the reduced interim net loss to “significant” cost savings. These were partly offset by lower revenue due to a decision to reduce its distribution footprint and cut down on discount-driven promotions, to be “in line with the strategy to behave like a brand”, it said at the time.

The company posted net losses ranging from HK$2.1 billion to HK$4.4 billion in the financial years ending June 30 in 2013, 2015, 2018 and 2019.

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