Esprit records 74% drop in first-half profit

Europe-focused retailer Esprit Holdings posted a 74 per cent fall  in first-half net profit as a deepening euro zone debt crisis battered demand, but the result beat forecasts and sent its shares to a five-month high. The company said its plans to re-establish Esprit as a leading fashion brand and restore long-term profitability were on track, despite the continued difficult economic climate. “Going to the second half of the financial year, we will continue the rigorous and systematic implementation of our Transformation Plan in a continued challenging business environment,” Esprit said in a filing to the Hong Kong bourse. Esprit, whose rivals include Sweden’s Hennes & Mauritz AB, US group GAP Inc and Spain’s Inditex SA, is in the midst of a costly restructuring after its chief financial officer resigned and the company admitted late last year that its brand had “lost its soul”. Esprit said it continued to face economic headwinds, especially in Europe, as a result of reduced consumer confidence and restricted credit facilities, which had hit its wholesale business and expansion. It also blamed high raw material costs and said it was in the process of setting up new sourcing offices in Indonesia and India, which would open in the second and fourth quarters of 2012, respectively. Shares in Esprit, which has fallen in rankings to become Asia’s No.7 apparel retailer by market value from third place a year ago, was up 17 per cent by 0624 GMT. It has risen more than 40 per cent so far this year despite a management reshuffle. The company’s shares plunged 73 per cent in 2011, weighed down by scepticism over its turnaround plan, lagging a 20 per cent fall in Hong Kong’s benchmark index. The fashion group, which is struggling to recover after last year’s 98 per cent earnings drop, said it targets to double sales and points of sales in China by June 2015. Esprit said in September that it aimed to double sales in China to HK$6 billion ($772.12 million) over the next four years and expand its point-of-sales network to 1,900 from 1,000. It is withdrawing from some underperforming markets and spending millions of dollars to revive its brand.