Sept. 16 (Bloomberg) -- Esprit Holdings Ltd., the Hong Kong-listed clothing retailer that makes most of its sales in Europe, is hiring a manager for China as it plans to more than double sales in the world’s most-populous nation in four years.
The new executive’s goal is to meet Esprit’s stated targets of HK$6 billion ($770 million) sales in China in the fiscal year that ends June 2015, with 1,900 sales outlets, Chief Executive Officer Ronald Van der Vis said yesterday.
“Given the importance of China, I want to have one boss who runs wholesale and retail,” said Van der Vis, adding Esprit usually has different managers for the two businesses. He also aims to build a “dedicated design team in China,” as he sets up a team of designers in Paris.
“We became too safe and boring,” said Van der Vis, who yesterday reported a 98 percent decline in full-year profit on the cost of closing stores and selling its U.S. and Canada operations. Esprit, which has lost 59 percent of market value this year, hired the brand director and creative director of Hennes & Mauritz AB’s H&M to rejuvenate its fashions.
Esprit plummeted 18 percent, the most in more than three years, to HK$15.08 in Hong Kong trading yesterday after saying net income fell to HK$79 million in the year through June 30, from HK$4.23 billion in the previous period.
Return on Investment
The retailer that started in California more than 40 years ago is in talks with to sell its operations in U.S. and Canada, which had a full-year operating loss of HK$410 million.
“It’s a pity, but we have to be realistic -- China is our future, not North America,” Van der Vis said in an interview in Hong Kong. “The return on our investment is so much higher in China on every euro or Hong Kong dollar that we invest than in New York.”
He won’t sell the rights to the Esprit brand and prefers selling to a buyer who “is interested in pursuing the same brand direction” the Hong Kong-based company is taking elsewhere, he said.
Van der Vis said he arrived at a “hand-shake” deal this week with a Chinese woman who will be Esprit’s China chief, reporting directly to him. He declined to provide details.
The maker and retailer of casual clothing had more than 1,000 points of sales in 185 cities in China as of June. Sales in China more than tripled to HK$2.68 billion from a year earlier, accounting for 7.9 percent of global sales.
‘Pulse of Fashion’
Esprit revenue derived from the rest of the world fell an average of 5.6 percent, according to Bloomberg calculations using data in the company’s earnings statement. The company plans to close 80 stores worldwide, including 24 in Germany and 12 in France.
The casual clothing maker made 79 percent of its HK$33.8 billion of full-year sales in Europe.
Setting up a design team in Paris will enable Esprit to be “closer to the pulse of fashion,” Van der Vis said. “I want to inject more newness and fashion on a regular, ongoing basis with shorter lead times. I want people, when they have lunch, they go out and smell the fashion in the street.”
Esprit plans to spend HK$6.8 billion on branding over the next four years, focusing its efforts in Germany, France, Belgium, the Netherlands and China, according to a company presentation.
The company aims to spend the equivalent of as much as 8 percent of sales on branding and marketing over the next four years, compared with 2.5 percent in the past, before reducing the percentage to “industry average levels of 4 percent to 5 percent,” according to the document.
Esprit was started in 1968 by Susie and Doug Tompkins, who sold clothes out of the back of a station wagon in San Francisco, according to the company’s website. The transformation into a global brand began three years later when they met Michael Ying, who was chairman from 1993 to 2006.
--Michael Wei, with assistance from Frank Longid in Hong Kong. Editors: Frank Longid, Joshua Fellman
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