* CEO aims to slash time it takes for new products to hit
* Europe-focused retailer set to post first full-year fiscal
* Investors bet Europe will help lift company's bottom line
* Shares up 37 pct since CEO appointment, outpacing main
index's 14 pct rise
By Donny Kwok
HONG KONG, Sept 10 Fast fashion, even faster.
That's the next target Esprit Holdings' CEO Jose
Manuel Martínez Gutiérrez is aiming for as the Zara-brand
veteran steers the Hong Kong-based clothing retailer through a
$2.3 billion turnaround.
When Esprit brought in Martinez from Zara's owner Inditex
last year, investors gave him a resounding vote of
confidence and drove Esprit shares to notch their biggest
one-day gain in 14 years.
He has so far cut inventories, brought in four of his former
Zara colleagues and announced plans to shut down 16 Esprit
stores, mainly in Europe, this fiscal year while maintaining a
strong presence in China.
Martinez now plans to slash by a third the time it takes for
new products to hit the shelves by simplifying distribution, one
of the hallmarks of his tenure at market leader Inditex.
"This is a business which is not rocket science, the magic
is if you keep it very, very simple, then it will become very,
very effective," Martinez told investors in May, after the
company warned of a second-half loss related to store closures
and acquisitions in China.
He said clothing should reach stores within 2-3 months of
manufacture, and not within 6-9 months, a strategy analysts said
could help make Esprit more competitive, but not any time soon.
The company is expected to report its first full-year loss
in two decades when it posts fiscal 2013 results on Tuesday, and
some analysts said the new management still had its work cut out
for it to revive the brand.
"The new management has yet to demonstrate to the market
that a revolution is under way," said Steve Chow, analyst at
Sunwah Kingsway Group Research.
"Shops are still lacking traffic flow and the brand has not
yet come up with a fresh image."
EYES ON EUROPE
Esprit has been trying to revive its image since it reported
a 98 percent drop in profit for the first half of 2011 and
admitted the brand had "lost its soul".
The company is struggling with sluggish demand in
austerity-hit Europe, which accounts for about 80 percent of its
revenue, and competition from Gap Inc and Uniqlo, the
flagship of Japan's Fast Retailing Co Ltd.
Signs of an economic pick up in Europe, however, are
cheering investors, analysts say.
Consumer confidence in Germany, which accounted for nearly
44 percent of sales in the six months ended December, is near a
six-year high and July retail sales rose a real 2.3 percent
year-on-year, against a 2.4 percent drop in June and 0.8 percent
fall in July last year.
"They (investors) are now betting on Europe. They have high
hopes that Esprit can benefit if its major markets in Europe do
turn around in 2014," said Alex Wong, a director at Hong
Kong-based brokerage Ample Finance Group.
Martinez has already managed expectations for a quick-fix,
and investors appear to be willing to give him time: Esprit
shares have gained about 37 percent since Martinez's appointment
was announced on Aug. 7, 2012, nearly three times the percentage
gain in the benchmark Hong Kong index during the same
When asked how long it would take to see signs of a
turnaround, he told a briefing in May: "A bit longer. Improving
our performance is going to be progressive but it is going to
take some time."