Is Esprit, which is like the ZARA model, going to "dog band" really come back?

Recently, Esprit Holdings Ltd. launched its 2016/2017 financial year report, showing that the group recorded a net profit of HK$67 million during the period ended June 30, up 219% year-on-year.

Esprit said that although the absolute value of net profit is not much, the main factor of the Group's annual performance improvement is that the basic business has been greatly improved. The ex-dividend profit does not include special projects, which rose by 386 million Hong Kong dollars; and the Group's prudent cash management system, At the end of the year, it had a net cash of HK$5.22 billion, no debt, and sufficient funds left for the Group to invest in sales growth and further restructuring measures.

The main reason for the improvement of the group's performance

The financial report also showed that in the 2016/2017 fiscal year, Esprit Global closed retail stores with an area of ​​19,076 square meters and net closed stores from 95 to 666. During the period, 441 comparable store sales fell by 5.2%. The Group's e-commerce revenue reached HK$4,032 million, accounting for 25.3%, but fell by 2.9% year-on-year.

Esprit said that the fundamentals of the group have improved mainly because of the accelerated elimination of non-profitable areas, that is, the closure of loss-making stores; commercial actions to protect gross profit margins, including reduction of promotion, price reduction and discounts for wholesale partners; decisive reduction of recurring costs The accelerated closure of the loss-making stores enabled the Group to reach a cost reduction plan of HK$1 billion a year earlier than originally planned.

Previously, Esprit had mentioned in its third-quarter earnings report: “The group has begun to look for opportunities to drive future growth, including opening new stores in the selected market, launching new product lines, and the Esprit brand will be launched in 2018. Launching promotional activities during the 50th anniversary and exploring the possibility of entering new markets." From this point of view, the strategy has begun to bear fruit.

Once brilliant is no longer

Esprit used to be a fashionable brand that needed some economic ability to bear. It firmly occupied the position of youth memory about fashion, and was the first fashion name in China with the meaning of “middle class”. However, the rivers are nowhere to be seen.

Esprit was founded in 1968 by North Face founder Douglas Tompkins. In 1972, Hong Kong Far East Co., Ltd. became Esprit's raw material procurement agent. In 1981, the first Esprit retail store opened in Causeway Bay, Hong Kong. In 1993, Esprit Asia, a subsidiary of Hong Kong Far East Co., Ltd., was listed in Hong Kong. Four years later, it acquired Esprit's European business and changed its name to Esprit Global Holdings Limited. Over the next decade, Esprit has maintained its growth momentum and reached its peak in 2008. After that, Esprit was affected by the financial crisis. On the other hand, the company's business problems were gradually exposed. In 2013, it recorded its first annual loss after listing, and then suffered losses for several consecutive years. Billions of Hong Kong dollars, causing stock prices to fall all the way.

Perennial discount, brand image is damaged

Since 2008, many Esprit costumes have begun to go to the outlets, not 50% off or 3 fold. There are discount promotions throughout the year, which has become a continuous business activity. The basic brand that consumers only buy during the discount period. A group of customers who had the most consumer power and desire for consumption have gradually moved away from the brand.

Due to the decline in performance, Esprit has almost disappeared in all levels of business districts, retreating in the second and third-tier business districts, but wherever Esprit is in the mall, the store area has been shrinking, from the crowded position to the corner position. In addition, the Esprit store's merchandise display has been confusing and has been criticized for a long time. Slowly, Esprit has become a product that no one wants in many people's minds, and the image is damaged. As of December 31, 2016, Esprit had only 698 directly operated stores, a one-third reduction compared to six years ago.

Imitate Zara mode self-help

Esprit's path to transformation is to go fast and fashion. In 2012, the company hired Ma Haosi from ZARA's parent company Inditex as CEO, and introduced three other executives with Inditex's strategic, procurement and sales experience.

There is no complete initiative in product sales, and the most work Esprit does is to design new products and open orders. Although it is still the ordering mode, it will be added once a year to once a month, and to some extent shorten the product turnover cycle, but still can not fully control the entire production and sales process.

Specifically, after each season's new product design is completed, the company often needs to go through two or three months of fabric procurement period before handing it over to each factory for production. During this period, an order meeting will be held, according to the order of each branch and agent. Orders are adjusted for production, and finally to the delivery and replenishment phases. A batch of new products takes months to complete from design completion to shelf-up. With the introduction of Zara's model, the delivery time has been shortened from the previous 9 to 11 months to 3 to 4 months, and about 7,000 models are launched each year. Next, Esprit will focus on brand rejuvenation, product upgrades, next-generation channels, market size optimization and expansion, and cost reduction.

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