* H1 net profit HK$95 mln vs HK$465 mln loss previously
* H2 business environment remains challenging - company
* Esprit hires China veteran as managing director
(Adds details on China business, executive comments)
HONG KONG, Feb 21 Esprit Holdings Ltd
swung to its first profit in a year thanks to a turnaround plan
that its chief executive said on Friday would also seek to stem
losses in China.
The clothing retailer has struggled in the world's
second-largest economy, where it shut 38 directly managed stores
last year as it grappled with high rents, stalling sales and
wholesalers with too much inventory.
It now wants mainland China, which accounts for less than 8
percent of turnover, to become a priority. Europe remains
Esprit's biggest market.
"It's important that we are clear with our partners in China
that we are fully committed to this market," Chief Executive
Jose Manuel Martinez Gutierrez told reporters during an earnings
briefing. "There is no way we can lose the opportunity for
Esprit in China."
Esprit's China turnover fell 24.5 percent in the first half
of the year as it lost more than a quarter of its wholesaling
space and 12.6 percent of its retail space.
The company said it has hired Bernard Mah, who spent 17
years as chairman of Hong Kong-listed Giordano International
Ltd's China operations, to run its China business. It
is also allowing wholesalers to return some unsold goods on a
"We know our results for China are not satisfactory and we
are strengthening our management at all levels," Chief Financial
Officer Thomas Tang said.
Esprit said it made a net profit of HK$95 million ($12.25
million) in the six months ended Dec. 31, compared with a loss
of HK$465 million for the same period a year earlier. It last
made a profit in the period ending June 2012.
Esprit has been restructuring its businesses globally over
the past year in a bid to return to profitability. The early
gains have come from cost cuts but whether the company remains
profitable will depend on its product line.
Chief Executive Martinez, who joined Esprit from rival
Inditex SA brand Zara in 2012, has been fighting to
revamp the retailer's business model to match Zara's successful
Martinez has hired other Zara veterans and unveiled
technology and distribution upgrades that will halve the time it
takes to get clothes designed, manufactured and in
Esprit, which forecast a first-half profit last month, also
repeated a warning that the second half of the year is typically
weaker and that the business environment remains challenging. It
still had 59 stores to close globally as of the first-half.
The retailer said it expects a further decline in turnover,
which fell to HK$12.81 billion in the first half, down from
HK$13.55 billion in the same period last year.
Esprit shares closed up 0.7 percent on Friday after
see-sawing in and out of negative territory for most of the day.
The shares have lost about 4 percent this year compared with a
roughly 3.5 percent decline in the benchmark Hang Seng Index.
($1 = 7.7556 Hong Kong dollars)
(Reporting by Clare Baldwin and Anne Marie Roantree; Editing by