UPDATE 1-Struggling retailer Esprit warns of six-month loss

Tue Dec 18, 2012 5:46am EST

* Says expected loss due to surprisingly weak operating results

* Company will continue to focus on revitalising brand

* Shares down 27 pct so far this year (Adds quote, share price, background)

HONG KONG, Dec 18 (Reuters) - Europe-focused retailer Esprit Holdings Ltd warned on Tuesday it may post a loss for the six months ended December due to worse-than-expected operating results, as it grapples with weakening demand in the euro zone and faces an uphill battle to revive its brand.

The company, which competes with Swedish clothing retailer Hennes & Mauritz AB and Spain's Inditex,

said it would continue to focus its efforts on rebuilding the brand, improving the quality of its products and enhancing its supply chain network.

"The board believes that these actions will help the group in capturing opportunities for further business growth when the market recovers," it said in a statement to the Hong Kong stock exchange.

The warning comes after Esprit in September missed earnings forecasts and said a slowing Chinese economy and lingering euro zone problems continued to pose risks to its business.

Shares of the company, which has a market value of $3 billion, jumped more than 30 percent in November when it said one of its founders had doubled his stake in the ailing retailer to become its second-largest shareholder.

The stock has still dropped 27 percent so far this year, lagging a more than 20 percent rise in the benchmark Hang Seng Index.

Esprit, which was born out of a clothing sale from the back of a station wagon in San Francisco more than 40 years ago, is in the midst of a $2.3 billion restructuring that has been overshadowed by a management reshuffle.

In August, it hired Jose Manuel Martínez Gutiérrez, an executive from larger rival Inditex, as its new chief executive after the sudden resignations of its top two officials in June.

Martínez managed Inditex's distribution and global retail network and helped overhaul the Spanish company's supply chain management.

Esprit, once known as "the bluest of blue chips in Hong Kong", contrasts sharply with Inditex, which has defied a slowdown in Europe and said earlier this month it plans to keep up the pace of expansion in China. (Reporting by Anne Marie Roantree; Editing by Muralikumar Anantharaman)

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