HONG KONG — Anders Kristiansen has his work cut out for him.
A fuller picture of what needs to be turned around at Esprit Holdings, where he has held the top job for less than a month, came to light after the company issued a profit loss warning on Thursday. According to the statement, the company is expecting a loss before interest and taxes around 2,170 million to 2,270 million Hong Kong dollars, or $276.59 million to $289.35 million at current exchange for the full year ending June 30. That compares to a loss before interest and taxes of 102 million Hong Kong dollars, or $13 million, for the same period last year.
In a memo sent to employees that was seen by WWD, Kristiansen wrote that the expected results are “extremely disappointing” but assured staff that a plan to restore Esprit back to sustainable growth was being strategized now.
“To help me with this, I have assigned Simon Heckscher to head a ‘task force’ made up of a small number of managers from within the organization,” Kristiansen wrote. “They will work with me, and all of you, to establish a plan to build an exciting future for Esprit.”
He added that he had been speaking to staff and visiting partners in key markets in the initial days.
“Through these exchanges, I gained valuable insights that have helped me understand what it will take to get Esprit back on track,” he said. “I will present this plan to the board of directors in September, and I look forward to sharing it with all of you once approved.”
Last month, Esprit said it was searching for a new chief product officer.
The main drag was a decline in revenue, blamed on poor customer traffic to brick-and-mortar stores, expected to fall in the range of 900 million to 950 million Hong Kong dollars.
The second biggest item was the full impairment of the remaining balance of goodwill for its China operations at 794 million Hong Kong dollars.
The withdrawal from the Australia and New Zealand markets announced last month is expected to be as much as 200 million Hong Kong dollars. Meanwhile, provisions for store closures and bad leases elsewhere overall as much as 185 million Hong Kong dollars. Impairment fixed assets of directly managed retail stores is estimated up to 16 million Hong Kong dollars.
A switch in the accounting methodology to reflect more appropriately the net realizable value of aged inventories is to increase the loss by up to 90 million Hong Kong dollars and the company expects another impairment in the range 35 million Hong Kong dollars due to obsolete SAP applications that have been capitalized.
Final full year results for the period ended June 30 are expected to be released in September.