January 25, 2018 / 2:04 AM / a year ago

Fashion group Esprit sees H1 loss on declining stores sales

HONG KONG, Jan 25 (Reuters) - Esprit Holdings Ltd said it expected to post losses in the fiscal first half, ended in December 2017, hit by weak sales at its brick-and-mortar retail stores as the fashion group rationalized its distribution footprint and a decline in China business.

The Europe-focused clothing retailer expected to post a net loss of up to HK$980 million ($125.4 million) for July-December period, as compared with HK$61 million profit in the year-ago period, the company said in a filing late on Wednesday.

Esprit said its gross profit margin had slightly increased and operating expenses had further reduced, but were not sufficient to outweigh the negative impact of the revenue decline during the period.

The operating environment continues to be “very challenging” amid the rapidly-changing industry dynamics, and the financial performance in the second half remains “uncertain”, the company added. It is due to release the interim results on Feb. 28.

Esprit is undergoing a multi-year revamp that includes store closures, price adjustments, new return policies, and technology and distribution upgrades.

It said in November it would continue downsizing effort to accelerate closure of loss-making retail stores and expect improvement in gross profit margin and operating expenses to outweigh the negative impact of revenue decline.

The company has expected controlled retail space to shrink by single digits in percentage terms in the current financial year with falling revenue.

Esprit shares dived more than 15 percent in early trade at HK$3.44, their lowest since April 1999.

$1 = 7.8176 Hong Kong dollars Reporting by Donny Kwok; Editing by Sherry Jacob-Phillips

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