By  on October 22, 2010

Targeting cost-conscious shoppers, Esprit Holdings Ltd. is accelerating its U.S. retail growth with outlet stores, initially focusing on the West Coast and Southwest.

The Ratingen, Germany-based brand made a splash in March with the opening of an 18,000-square-foot flagship on West 34th Street in Manhattan, but that store will be a rarity in a U.S. expansion strategy that will be dominated by 3,500- to 5,000-square-foot outlets. Esprit plans to add 15 to 20 outlet stores over the next year — five this month in the California cities of Los Angeles, Gilroy, Vacaville, Desert Hills and Milpitas — and no full-price stores.

“This is not a bad growth vehicle without damaging your name or your regular-priced stores,” said John Gunn, president of the Americas at Esprit. “Our business continues to splinter as we move forward…and our regular price will still go in the top malls.”

Outlet stores are a relatively cheap route to expansion. Gunn estimated building an Esprit outlet is one-third the cost of a full-price store, along with the lower rents at outlet centers compared with conventional malls. Esprit manufactures merchandise specifically for its outlets and that constitutes 95 percent of what is on the floor. The average price is 30 percent less than Esprit’s full retail prices.

Gunn said Esprit’s approach to outlet store expansion is to first cluster units on the West Coast and in the Southwest, far from its concentration in the Northeast, and target high-volume outlet centers with heavy tourist traffic. After this fiscal year, he said Esprit expects to add five to 10 U.S. outlet stores annually and full-price stores in malls as prime space becomes available. Gunn didn’t specify a number for the full-price unit, saying they would increase “opportunistically.”

Esprit has been trying to recapture the momentum it had in the U.S. in the Eighties and Nineties. Gunn said he isn’t concerned that an outlet strategy might derail that effort by associating the brand with discounting. With Esprit’s retail network limited in the U.S., Gunn contended any additional exposure to customers is beneficial. And he said that Esprit creates upscale outlet environments with in-store visuals and fixtures that look like their regular-price counterparts for outlet shoppers who have “gotten more sophisticated.”

“We find that the outlet is a completely different shopping experience for the consumers, and I think that it is a market onto itself,” he said. “Somebody can be running an outlet strategy as well as a wholesale strategy as well as a regular-store strategy as well as an e-comm strategy without really cannibalizing any of them.”

Esprit will have 15 outlet stores and 35 full-price stores in the U.S. at the end of the month.

This fiscal year, Gunn said Esprit stores in the U.S. are registering a 2 percent rise in same-store sales. The Manhattan flagship is “right on plan,” he said.

For the fiscal year ended June 30, Esprit Holdings’ net profit attributable to shareholders fell 10.9 percent to 4.23 billion Hong Kong dollars, or $543.4 million, and its revenue declined 2.2 percent to 33.73 billion Hong Kong dollars, or $4.34 billion.

Since the appointment of Ronald Van der Vis as chief executive officer in April 2009, Esprit Holdings has hired key executives. Earlier this month, Jörgen Andersson joined the company as director of brand and new business after more than 20 years at Hennes & Mauritz, which included almost four years as ceo of H&M in Switzerland. In addition, Jan Nord, former creative director at H&M, became Esprit’s creative director of brand and new business.By Rachel Brown

Targeting cost-conscious shoppers, Esprit Holdings Ltd. is accelerating its U.S. retail growth with outlet stores, initially focusing on the West Coast and Southwest.

The Ratingen, Germany-based brand made a splash in March with the opening of an 18,000-square-foot flagship on West 34th Street in Manhattan, but that store will be a rarity in a U.S. expansion strategy that will be dominated by 3,500- to 5,000-square-foot outlets. Esprit plans to add 15 to 20 outlet stores over the next year — five this month in the California cities of Los Angeles, Gilroy, Vacaville, Desert Hills and Milpitas — and no full-price stores.

“This is not a bad growth vehicle without damaging your name or your regular-priced stores,” said John Gunn, president of the Americas at Esprit. “Our business continues to splinter as we move forward…and our regular price will still go in the top malls.”

Outlet stores are a relatively cheap route to expansion. Gunn estimated building an Esprit outlet is one-third the cost of a full-price store, along with the lower rents at outlet centers compared with conventional malls. Esprit manufactures merchandise specifically for its outlets and that constitutes 95 percent of what is on the floor. The average price is 30 percent less than Esprit’s full retail prices.

Gunn said Esprit’s approach to outlet store expansion is to first cluster units on the West Coast and in the Southwest, far from its concentration in the Northeast, and target high-volume outlet centers with heavy tourist traffic. After this fiscal year, he said Esprit expects to add five to 10 U.S. outlet stores annually and full-price stores in malls as prime space becomes available. Gunn didn’t specify a number for the full-price unit, saying they would increase “opportunistically.”

Esprit has been trying to recapture the momentum it had in the U.S. in the Eighties and Nineties. Gunn said he isn’t concerned that an outlet strategy might derail that effort by associating the brand with discounting. With Esprit’s retail network limited in the U.S., Gunn contended any additional exposure to customers is beneficial. And he said that Esprit creates upscale outlet environments with in-store visuals and fixtures that look like their regular-price counterparts for outlet shoppers who have “gotten more sophisticated.”

“We find that the outlet is a completely different shopping experience for the consumers, and I think that it is a market onto itself,” he said. “Somebody can be running an outlet strategy as well as a wholesale strategy as well as a regular-store strategy as well as an e-comm strategy without really cannibalizing any of them.”

Esprit will have 15 outlet stores and 35 full-price stores in the U.S. at the end of the month.

This fiscal year, Gunn said Esprit stores in the U.S. are registering a 2 percent rise in same-store sales. The Manhattan flagship is “right on plan,” he said.

For the fiscal year ended June 30, Esprit Holdings’ net profit attributable to shareholders fell 10.9 percent to 4.23 billion Hong Kong dollars, or $543.4 million, and its revenue declined 2.2 percent to 33.73 billion Hong Kong dollars, or $4.34 billion.

Since the appointment of Ronald Van der Vis as chief executive officer in April 2009, Esprit Holdings has hired key executives. Earlier this month, Jörgen Andersson joined the company as director of brand and new business after more than 20 years at Hennes & Mauritz, which included almost four years as ceo of H&M in Switzerland. In addition, Jan Nord, former creative director at H&M, became Esprit’s creative director of brand and new business.

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