Esprit plans overhaul, will exit US and Canada

AP News
Posted: Sep 15, 2011 3:59 PM
Esprit plans overhaul, will exit US and Canada

Clothing company Esprit Holdings Ltd. is looking to return to the popularity it once had with shoppers during the 1980s, with plans for a major overhaul of its business that includes exiting the U.S. and Canada.

The Hong Kong-based retailer also said its earnings for fiscal 2011 dropped 98 percent.

Aside from leaving North America, Esprit announced Thursday that it will shut down 80 unprofitable stores, which includes retail operations in Spain, Denmark and Sweden.

The company will spend more than $18 billion Hong Kong ($2.31 billion) on a plan that will take until 2014 or 2015 to be fully implemented, hoping that it will bring its brand back to the forefront of shoppers' minds.

"The brand has gradually lost its soul over the past few years. The heritage of the brand has been neglected and the company lost its customer focus," Group CEO Ronald Van Der Vis said in a statement.

Esprit was a top brand among teens in the 1980s.

Esprit plans to spend $6.8 billion Hong Kong ($872.9 million) over four years to reshape its brand. The company will create a trend unit based in Paris and a design center in China so that hot fashion trends can be brought to market faster. A new unit will also be made for denim, a wardrobe staple that has becoming increasingly popular during the global economic downturn because of its low cost and durability.

Esprit will dole out about $3 billion Hong Kong ($385.1 million) to refurbish its stores as well as wholesale space. It plans to open more than 200 new franchise stores, excluding China _ its second-largest market.

The company will ramp up efforts in Europe and Asia, concentrating on countries including France, Taiwan, Singapore and Malaysia. One of the biggest pushes will come in China, with plans to nearly double its store base to 1,900 locations from 1,000.

Van Der Vis said Esprit's moves on its brand will hurt its financial results, particularly within the next two years. Exiting the North American operations will cost $1.3 billion Hong Kong and additional store closings will total $1 billion Hong Kong.

Esprit said that the money it plans to spend on its brand over the next four years consists of $7 billion Hong Kong on long-term investments and $11.5 billion on business operations.

For the year ended June 30, Esprit reported its profit slid to $79 million Hong Kong ($10.1 million) from $4.23 billion Hong Kong ($543 million).

Excluding the sale of its North American operations and additional store closings, profit was $2.35 billion Hong Kong.

Revenue inched higher to $33.77 billion from $33.73 billion.

Esprit, which trades on the Hong Kong Stock Exchange, runs more than 1,100 retail stores globally.