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Esprit Year-End Profits Leap 24.5%

Growth in Europe key to revenue, earnings expansion.

An Esprit store in Germany.

Propelled by fast-paced expansion in new European markets, Esprit Holdings Ltd. translated robust increases in revenues into gains in profitability.

For the 12 months ended June 30, net income rose 24.5 percent to 6.45 billion Hong Kong dollars, or $827.6 million, from 5.18 billion Hong Kong dollars, or $664.5 million, during the prior year. Earnings per diluted share were 5.15 Hong Kong dollars, or 66 cents, versus 4.16 Hong Kong dollars, or 53 cents. Figures have been converted at average exchange rates for the respective periods.

Net revenues grew 25.6 percent to 37.23 billion Hong Kong dollars, or $4.78 billion, from 29.64 billion Hong Kong dollars, or $3.8 billion. Wholesale turnover grew 26.2 percent to 20.94 billion Hong Kong dollars, or $2.69 billion, while retail sales were up 25.2 percent to 16.06 billion Hong Kong dollars, or $2.06 billion. Wholesale activities accounted for 56.3 percent of revenues versus 43.1 percent attributable to retailing. Licensing and other revenues grew 8.5 percent to 229 million Hong Kong dollars, or $28.4 million.

By region, sales in Germany, which include wholesale activities directed at Russia, Poland, Greece and other markets, rose 24.8 percent to 17.39 billion Hong Kong dollars, or $2.23 billion, and were responsible for 46.7 percent of the corporate total. The rest of Europe was up 28.1 percent to 14.91 billion Hong Kong dollars, or $1.91 billion, with volume advancing 33.9 percent in both France and Scandinavia, and Spain and Italy, the company’s two newest markets in the region, up 38.6 and 19.8 percent, respectively.

Revenues in Asia-Pacific rose 21 percent to 4.07 billion Hong Kong dollars, or $522.6 million, and those in North America and other areas were up 22.6 percent to 858 million Hong Kong dollars, or $110.1 million.

The gains in Esprit’s retail activities were driven by a 6.9 percent increase in same-store sales, led by 7.2 percent growth in Europe, and a 14.3 percent increase in retail selling space. Germany accounted for nearly half of the company’s retail sales, with volume of 7.9 billion Hong Kong dollars, or $1.01 billion, up 9.5 percent from the prior year.

Retail sales in the Asia-Pacific region were up 14.2 percent to 2.47 billion Hong Kong dollars, or $317.3 million, as strength in Australia, where sales grew 28 percent and rose 7.9 percent on a same-store basis, compensated for lower sales in Hong Kong, where square footage was reduced 7.6 percent as weaker stores were closed and replaced by units in better locations.

The company marked a milestone at the end of its fiscal year as its directly managed stores and controlled wholesale points of sale exceeded 1 million square meters, or about 10.8 million square feet.

The company, which is about to celebrate its 40th anniversary, expects to open 20 stores in Germany, 10 stores in Scandinavia and five stores in France during the current year. It also plans to open its first store in Portugal this winter. Overall, it will invest about 1 billion Hong Kong dollars, or some $128 million, to open more than 130 stores in the year ahead. Esprit also projects investments of about 300 million Hong Kong dollars, or $38.5 million, to revamp existing stores.