Esprit’s new strategy: China and wholesale to get back to profits

Esprit draws a renovated road map. The large distribution group has announced its prediction to carry out a restructuration plan that focuses on Chinese market and wholesale channel to turn the company around and get back to profitability. The company will direct 1.5 billion dollars from Hong Kong (168.9 million euros) to the reorganisation plan.

During a meeting with the investors, Anders Kristiansen, the company’s CEO since last spring, has revealed the key points that need to be addressed through this new strategy. Esprit’s goal is set on opening 220 stores in China by 2023 and 78 more in the rest of Asia during the next five years.

In order to rebuild its presence in the Asiatic giant, the company has created a design team specialised in the creation of clothing items for the region. Furthermore, the group has reinforced its activity in online channel through the strengthening of its partnership with Tmall and the entrance to other marketplaces, as well as renewing its own e-commerce platform.

Esprit’s restructuration will produce costs valued in 1.5 billion Hong Kong dollars (168.9 million euros)

The executive has admitted that the company experienced some bad managements during recent years. Esprit has stated that about 40% of its headquarters’ personnel will be laid off and that it would fuse together its five offices into just one located in Germany, as well as the fact that the group is going to reduce the executive team from thirteen members to six. Moreover, the company will also carry out a restructuration of its network of stores.

“It goes beyond an investment on branding to rediscover the brand. The plan seeks to change the mindset of consumers through a change in product offer”, explains the executive. For that, the group will reduce between 20% and 30% the volume of its collections.

The company’s red numbers increased dangerously in 2018, with losses valued in 2.55 billion Hong Kong dollars (279 million euros), compared to the 102 million dollars (11.1 million euros) it scored the previous year. The company’s sales were also reduced. Esprit ended the period with an income of 15.45 billion Hong Kong dollars (1.68 billion euros), a 3% less than the figure obtained in the previous year.

Esprit has undergone a restructuration for several months, although until now, the plan had not been exposed. Last May, the group closed the 67 points of sale with which it operated in Australia and New Zealand, thus ceasing its operations in the region.