SHANGHAI — Esprit’s loss nearly doubled to 3.9 billion Hong Kong dollars, or $515 million, for the year to June, a set of poor results that follow the sudden cancelation of a joint venture agreement to relaunch the brand under a new concept in mainland China and COVID-19-challenged operations in Europe.
Revenue was 9.9 billion Hong Kong dollars for the same period, compared to 12.9 billion Hong Kong dollars a year prior, a decline of 21 percent when adjusted for foreign exchange fluctuations. Revenue from the first half of the fiscal year from July 2019 to February witnessed an 11 percent decline, which widened to the 41 percent decline from March to June 2020 as the pandemic took hold.
Although COVID-19 has battered brands all across the board, Esprit has been troubled for the last decade. It has witnessed its brand value decline precipitously despite a series of promised turnarounds from three chief executive officers, struggling to evolve its identity amidst the arrival of fast-fashion giants H&M and Zara.
The brand signed a joint venture agreement with Mulsanne Group last December to relaunch in mainland China, while announcing it would close the rest of its Asian operations by June 30. But the arrangement with Mulsanne was terminated abruptly on July 30, “due to a material breach of terms by the contract partner” and all its outlets in mainland China were also closed by the end of June. The company is “currently formulating a new strategy,” it said in financial filings.
In March, it applied for bankruptcy protection for for its six German subsidiaries.
The brand claims California roots — it was founded by Doug and Susie Tompkins who also founded The North Face — but its biggest market today is Germany and has negligible e-commerce sales to the U.S. Its store network in Germany and in other European countries were subject to compulsory store closures beginning mid-March. The stores were allowed to reopen in mid-May, Esprit said, but “demand in the market remained suppressed compared to levels experienced at the height of the pandemic.”
As of June 30, the firm has trimmed its staff to approximately 3,400 full-time workers, down from the more than 4,900 the same time a year ago.