Esprit Holdings Ltd. has shareholders on alert that it’s expecting to report a sizable loss when its half-year financial results are finalized.
The European-focused sportswear brand, which is based in Hong Kong and also has a base in Germany, said in a late Wednesday filing that executive management is looking at a loss of 950 million Hong Kong dollars to 980 million Hong Kong dollars, or $121.5 million to $125.3 million, for the six months ended Dec. 31.
Shares of the company on the Hong Kong Stock Exchange fell more than 16 percent to 3.4 Hong Kong dollars by early Thursday. The company’s market capitalization fell to 6.5 billion Hong Kong dollars from 7.75 billion Hong Kong dollars.
Esprit said “three major factors” are to blame for the loss, led by a “significant decline” in its China business, that in turn created a bigger-than-expected revenue decline, compounded by a shift in taxes that saw the company go from a 74 million Hong Kong dollar credit to owing 5 million Hong Kong dollars last year.
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In September, the company said it was only expecting a “modest” decline in revenue for the year ahead.
The company added that Esprit is “currently in the midst of fine-tuning its strategic measures to establish a long-term platform for profitable growth,” but admitted that current environment for its business “continues to be very challenging,” citing industry “seasonality” and general changes.
With that, Esprit said its performance in the second half of the fiscal year “remains uncertain.”
While Esprit may be seeing a slowdown in its China business, a slew of other brands, from Ralph Lauren to Lululemon, are looking to the region as a dependable area of growth, as the North American market proves to be a struggle for revenue.
Esprit is still widespread, with 761 retail stores and a presence in more than 6,000 third-party retailers, but that’s less than its Nineties and early Aughts heyday. At one time, the company had around 1,000 stores and worked with close to 9,000 wholesale accounts.
Its last financial report in November showed revenue of 4 billion hong Kong dollars, down from 4.1 billion Hong Kong dollars in the year-ago period.
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