Anders Kristiansen is ready to remake the struggling Esprit — and the still-new chief executive officer said it’s all going to be different this time.
Kristiansen, who stepped into his role in June, was brutally honest in his assessment of how the company has performed under three other ceo’s over the past decade and resolute in the direction he is steering the storied brand.
“The world is changing,” the ceo told investors and analysts during a meeting in Hong Kong. “There’s artificial intelligence. All the new entrants we have on the online side, whether that’s Asos, Zalora, Zalando….
“And Esprit has changed and maybe too much,” he said. “Many different things have been tried, but I think what we have here is a solid plan about our roots. If you go back over the past 10 years, we have tried many different things…from the campaign with Gisele [Bündchen] back in 2011, where we burned a lot of cash, to various different looks and feels of the brand. We need consistency and a red line in what we’re doing. And we’ve lost touch with our audience due to lack of customer focus.”
He said quality and fit have been the top two complaints about the brand for six years and that for the first time, the company is going to do something about it.
“We need bold changes, otherwise, this won’t work,” he said. “And we’re prepared to make those bold changes.”
The company plans to lay off 40 percent of its headquarters staff, merging five offices into one in Germany and cutting the size of its Hong Kong office. On top of that, Esprit is going through its store base and addressing doors that lose money, either shuttering them or negotiating with landlords.
The restructuring will spur onetime costs of 1.5 billion to 1.7 billion Hong Kong dollars, or $190 million to $220 million at current exchange, and is expected to lead to a break-even performance in two to three years.
For the year ended June 30, Esprit posted a loss of 2.55 billion Hong Kong dollars as revenues fell 11.1 percent to 15.5 billion Hong Kong dollars.
On the product side, Kristiansen said the brand will be streamlined, focused more on basics and easier to understand for shoppers.
“The biggest trend at the moment, and you’ll all have noticed it, is the world of casualization,” he said. “The world has turned far more casual over the last five to seven years. You can turn up to work today in sneakers and jeans and chinos, which was unheard of only a few years back. That is reality. We used to own that business. We have stepped away for it over the past years.”
As the brand steps back in, it’s focusing on sales.
“We want a more commercial assortment…those products in our stores and online and with our partners that our customers want and not products that we want,” the ceo said. “We should improve quality and fit. We need to develop a signature handwriting. That’s important. Today, when I walk into our stores, I see way too many options. I see way too many colors. This makes it very difficult to manage the stores, but it’s also impossible for the customer to understand what we are trying to tell them.
“Consequently, we’re going to cut down dramatically on colors,” he said. “It doesn’t mean that we don’t want colors, but we want colors as spikes, as highlights, and we want to focus on those colors. And if you look around today, the majority of you are wearing gray, black, blue. Those are the biggest colors. Those are the colors we have had very little of. We scrape the Internet. We see our competitors have 30 to 40 percent black. We only have around 15 percent. That’s a missed opportunity. On the other hand, we have lots of bright colors, and there is less demand for those bright colors. We will cut options, probably somewhere between 20 to 30 percent, depending on market.”
So the company is aiming for muted styles, but a greater impact when colors are used and, hopefully, increased consumer engagement and better profits.