All Asian Esprit stores outside mainland China will be closed by Esprit Holdings, as an attempt to cope with the financial difficulties culminating from the Covid-19 pandemic.
56 shops in Malaysia, Taiwan, Hong Kong, Macau and Singapore will close by the 30th of June according to the Hong Kong-listed house on Monday. The closures are part of the company’s “restructuring initiatives to focus resources and recalibrate operations” amid the pandemic.
However, the 56 shops that are closing down contribute to less than 4 percent towards the group’s global turnover.
The retail sector has been hit hard by the Covid-19 pandemic worldwide, as lockdowns and restrictions were imposed forcing people to stay home and many shops to close for the time being.
British clothing chains like Warehouse and Oasis have collapsed under financial difficulty. Cath Kidston, a fashion and furnishing retailer, has also succumbed to this problem.
“The whole industry has been affected by the global crisis. We first felt the impacts in Asia and now in Europe, where many of our stores have been closed. This is forcing us to look at the contribution all markets make to the group’s performance,” said the chief executive of Esprit Group, Anders Kristiansen.
Closure of the Esprit stores are estimated to cost between the range of HK$150 million and HK$200million. It is said in a filing to the stock exchange that this will have negative impact on its full financial year ending June 30th 2020.
The wholesale and licence business of Esprit along with its joint venture business in mainland China, will go on in Asia following the store closures. Core markets in Europe will be its focus.
For rental relief, Esprit is currently negotiating with landlords across all markets for better terms and reductions “and will terminate stores with rental terms that could not provide viable business performance.” This will include the use of available assistance from the government.
Dr Raymond (Ching Fai), executive chairman, and CEO Kristiansen are sacrificing their pay during this period, which totals up to a 35 percent pay cut for the executive management team along with other pay reductions for other staff according to the filing.
“Apparel is one of the retail sectors which is hardest hit by Covid-19, revenue decline in the sector so far this year is enormous and there is no recovery in sight, not even in China where stores are open again but spending is still significantly below normal levels,” said Imke Wouters, partner at global consultancy Oliver Wyman.
“The apparel market will for sure experience negative growth for the full year and the question is how steep the overall decline will be.”
“Many apparel companies globally will be at risk due to strongly negative cash flows and an unsustainable level of debt making it hard to receive additional financing,” she said. “As a result, we expect to see many more closures in the coming months.”
A 52.2 percent drop in sales from Asia totalling HK$140 million (US$18.1 million) was recorded by Esprit during the July to September 2019 period, compared to the same period the previous year. This resulted in a drop in contribution from Asia to group revenue to 5.9 percent compared to 9.3 percent over the same period the previous year.
A lower drop of less than 22.2 per cent was seen in Europe’s revenue which came to HK$2.2 billion, while its total global contributions increased from 90.7 percent to 94.1 percent. However, in the third quarter, Esprit’s overall total worldwide revenue decreased by 25 per cent to HK$2.4 billion compared with the same period in the previous financial year, showing the group’s struggle to maintain its sales.
Netherlands, Germany and Sweden have reopened their Esprit stores but are uncertain whether their businesses will return to how they were performing pre-Covid-19, as many economists believe the impact from the pandemic will be felt well into the latter part of 2021.
29th April 2020 18:03
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