Garment Retailer Esprit Profit Fell 19% In The Second Half Of The Year

The eighth largest in the world

In the paper submitted to the Hongkong stock exchange, the company said, "we expect that the wholesale market in the first half of the new financial year will still face many challenges".

"Wholesale orders between July 2010 and November were calculated in local currency to achieve a median year-on-year decline, but in November 2010 the monthly figures improved, especially for flash orders and repeat orders."

Analysts said the weakness of the euro and the wholesale business downturn offset the growth of retail sales, thereby affecting the company's revenue.

The appreciation of the renminbi and the increase in rental and labor costs in the Asian market may affect the company's profitability in the coming year.

Esprit group is the main European market.

The company indicated that HK $2 billion 200 million had been allocated for capital expenditure in the new financial year.

HK $738 million will be used to open more than 100 new stores, expand existing stores, and refurbished old stores in HK $406 million.

The company said its planned retail sales increased by 5-10% in the new financial year ending in late June 2011.

Earnings lower than expected

Esprit announced net profit of HK $1 billion 530 million in the second half of this fiscal year ending June this year, down from HK $1 billion 890 million before last year.

This figure is lower than the average forecast of HK $1 billion 730 million by the 13 analysts interviewed by Reuters.

Esprit's competitors include Hennes&Mauritz, Inditex and GAP.

The net profit for the entire financial year ended June was HK $4 billion 230 million, lower than the HK $4 billion 439 million expected by the market and HK $4 billion 745 million a year ago.

The company's share price fell by more than 13% this year, which is 4.5% higher than the Hang Seng Index in Hongkong during the same period.

The company's share price rose 1.4% before noon on Thursday.