(Recasts and updates with comments from chief executive)
By Donny Kwok
HONG KONG May 8 Europe-focused clothing
retailer Esprit Holdings Ltd has hired more staff from
Inditex to drive its restructuring and implement the
kind of fast fashion turnaround on which the larger Spanish
rival has built its success.
A day after Esprit warned of a substantial loss in the
second half, Chief Executive Jose Manuel Martínez Gutiérrez, who
joined from Inditex last September, said on Wednesday it was
vital to revamp the brand and provide value for money.
He said it would take 18 months to restructure the business,
which is grappling with a slump in demand due to austerity in
Europe and the euro zone debt crisis.
Esprit said on Tuesday it would record a goodwill impairment
of between HK$1.8 billion and HK$2 billion and close around 16
loss-making stores - most of them in Europe - at a cost of
HK$250 million to HK$300 million.
"It is important to keep things simple. 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," he said.
Inditex, the world's largest clothing retailer, has made
founder Amancio Ortega the world's third richest man by using
its nimble, Spain-based distribution model to rapidly churn out
fast-changing ranges and expand aggressively into emerging
Martinez, a former McKinsey consultant, was distribution and
operations director at Inditex with a focus on improving the
firm's supply chain.
Martinez, who said he had brought in four Germany-based
executives from Inditex's Zara clothing line to help with the
revamp, said most of the provisions being taken by Esprit were
non-cash and would not impact day-to-day operations.
He added he was still optimistic on the outlook for the
Shares of Esprit, which sells everything from bed sheets to
jeans, closed down nearly 5 percent on Wednesday, lagging a
0.9 percent gain in the benchmark Hang Seng Index.
Investors last year cheered the appointment of Martinez,
driving the stock to its biggest one-day gain in 14 years.
($1 = 7.7602 Hong Kong dollars)
(Additional reporting by Yimou Lee; Editing by David Cowell)