Esprit Turnover and Profit Dips; Cash Hoard Leaps

Esprit Holdings Limited suffered declines in sales and net profit in its latest six-month performance, even as its net cash balance boomed mightily.

The Hong Kong-based fashion group revealed Wednesday, Feb. 3, that group turnover declined by 3.1 percent in the half year ended Dec. 31, 2009, slipping to 18.5 billion Hong Kong dollars, or $2.371 billion at current exchange rates.

However, Esprit’s net cash position grew a whopping 61 percent to $7.9 Hong Kong billion dollars, or $1.017 billion, buoyed by the retailer’s determined cost-cutting measures in introduced last year.

Esprit is suffering from the global financial turmoil and weak consumer confidence, resulting in weaker profitability. It’s net profit figure declined again, dropping 5 percent to 2.705 billion Hong Kong dollars, or $348 million, from 2.853 billion Hong Kong dollars, or $373 million, in the second half of 2008. This net figure was also much further down from 3.3 billion Hong Kong dollars, or $425 million, in the like period in 2007.

Still, underlining the healthier financial situation, the board of Esprit decided on an interim dividend of 0.74 Hong Kong dollars per share, or 10 U.S. cents, a bullish 35 percent dividend payout ratio.

However, Esprit’s vaunted net cash balance also, in large part, represents a rebuilding of its financial assets, seeing that 18 months ago it had a cash balance of 6.521 billion Hong Kong dollars, or $840 million.

Nonetheless, the company trumpeted its performance.

“During the reporting period, we announced the acquisition of the remaining interest in the China joint venture. This is an important development for the group as China is one of the biggest and fastest growing apparel markets in the world. China represents a new growth engine for Esprit. In addition, it is also an important step for Esprit in becoming a truly global company as our presence in Asia Pacific will be strengthened significantly,” Esprit’s CEO Van der Vis said in a release.

In its release, Esprit did not provide any figures for its performance in the previous financial year, but these are available from its own official website.

Esprit operates some 830 directly managed retail stores worldwide and distributes through more than 12,900 wholesale point-of-sales internationally, occupying total selling space of over one million square meters, or 12 million square-feet, in more than 40 countries. Esprit added some 30 stores to its chain in 2009, even as it trimmed over 1,000 point-of-sales globally, in a long-term strategy of developing its fully-owned own retail chain. The group’s retail business now contributes nearly half of Esprit’s total turnover.

Esprit Holdings Limited is quoted on several stock markets including the Hang Seng Index, MSCI Hong Kong Index an FTSE All-World Index for Hong Kong.

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