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Sep 2, 2010
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Esprit H2 net down 19 pct, forecasts challenges

By
Reuters
Published
Sep 2, 2010

HONG KONG, Sept 2 (Reuters) - Esprit Holdings Ltd (0330.HK), the world's No.8 apparel retailer by market value, on Thursday posted a worse-than-expected 19 percent fall in second-half profit amid slower sales growth and euro weakness, and said the wholesale market will remain challenging to the end of calendar 2010.

Esprit
Esprit Store, Singapore. Photo : Corbis

"We expect the wholesale market environment in the first half of the new financial year to remain challenging," the company said in a filing to the Hong Kong bourse.

"The wholesale order book between July and November 2010 shows a mid-single-digit year-on-year decline in local currency and it is improving month by month to November 2010 -- particularly strong in flash and repeat orders."

Analysts said the lower euro and weak wholesale business had offset retail sales growth, affecting earnings. The appreciation of the yuan and soaring rental and labour costs in Asia could impact profit margin in the year ahead.

The Europe-focused fashion group said it had earmarked HK$2.2 billion for capital spending in the new financial year, of which HK$738 million would be invested in opening about 100 new stores and store expansion, as well as HK$406 million for refurbishing existing stores.

The company said it planned to expand the overall volume of retail selling space by 5-10 percent in the fiscal year ending June 2011.

EARNINGS LAG FORECAST

Esprit posted a net profit of HK$1.53 billion ($196 million) for the second half of its fiscal year ended June, down from HK$1.89 billion a year earlier.

The result lagged an average estimate of HK$1.73 billion from 13 analysts polled by Thomson Reuters.

Competing with Hennes & Mauritz AB (HMb.ST), Inditex SA (ITX.MC), and GAP Inc (GPS.N), Esprit reported a net profit of HK$4.23 billion for the fiscal year ended June, against a consensus forecast of HK$4.439 billion and a year-earlier profit of HK$4.745 billion.

Shares of the company have fallen more than 13 percent so far this year, compared with a 4.5 percent fall by the Hang Seng Index .HSI. The stock was up 1.4 percent by midday Thursday.

(US$1=HK$7.77) (Reporting by Donny Kwok and Michelle Chen; Editing by Chris lewis)

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