Esprit to close 80 loss-making stores worldwide
Staff Reporter
2012-09-05
11:22 (GMT+8)
An Esprit fashion show in Hong Kong. (File photo/Xinhua)
Faced with competition from international clothing brands Uniqlo, Zara, H&M and Gap, to name a few, Esprit, a fashion brand previously popular among young people, is encountering a crisis of aging and has begun closing down its stores, Guangzhou's Southern Metropolis Daily reports.
Esprit, which won a large share of the fashion market with its simple and attractive designs, is no longer among the most popular global fashion brands. An Esprit flagship store in Shanghai closed down recently.
Parent company Esprit Holdings claims it is closing its stores as part of a plan to transform itself. It plans to shut down 80 loss-making outlets, including 65 in Europe and 15 in Asia Pacific. Currently, over 50% of its stores have been closed or are in the final talks for closure.
The report said that while the company did not give reasons for closing down its Shanghai flagship store, market insiders attributed it to rising rents and declining sales. Esprit has not yet decided how it will position itself and whether it will be a luxury brand or a casual clothing line.
A source familiar with the Shanghai store said Esprit had recently restructured its management, transforming itself into an international high-end brand. Due to these changes, it was facing pressure from its unclear market positioning and high store rents.
Data showed that falling sales had reduced Esprit's profits for three consecutive years. The company's turnover for the nine months to March 31 was 24 billion yuan (US$3.8 billion), a 7.2% fall year-on-year.
The report said that due to its weak performance, the company's shareholders had reduced their stakes in the company.
Among the fashion brands which entered the Chinese market early on in the game, Zara has been ahead of Esprit in terms of fashion; H&M has surpassed it in product diversification; while Uniqlo has a better price/performance ratio.
Ronald van der Vis, the former executive director of Esprit, said in September 2011 that he was planning to increase the company's profits in Europe in four years and double profits in China, through improved designs.
As part of Esprit's 18.5 billion yuan (US$2.9 billion) reform plan, 6.8 billion yuan (US$1.07 billion) will be invested in rebuilding its brands, and 5.7 billion yuan (US$898 million) will be used to open new stores and revamp old stores.
However, changes in the company's high-level management might slow down the execution of its plan, especially in the Chinese market.
