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Profit warning: Esprit expects losses of almost 2 billion in financial year 2023

By Sylvana Lijbaart

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Business

Credits: Esprit

Declining revenues and the inability to reduce operating costs due to long-standing historical structural problems make it impossible for Esprit to avoid a profit warning. The US fashion group expects a net loss of almost two billion Hong Kong dollars, or 202.5 million pounds, for the financial year 2023, as reported in an update.

The expected net loss would mean Esprit would exceed its loss of 664 million Hong Kong dollars by 186.3 percent. The drop in sales causes the company's gross profit to fall by almost 13 percent to about 2.5 billion Hong Kong dollars (253 million pounds). Furthermore, Esprit expects to record total sales of 5.9 billion Hong Kong dollars (597 million euros), marking a 16.3 percent decline.

Esprit's decline in sales, like many other fashion companies, is due to the unfavourable macroeconomic environment in Europe, especially in Germany, which is characterised by high interest rates in response to high inflation. Moreover, geopolitical tensions are again playing a role, with energy costs having a major impact on consumers' wallets.

Esprit returned to profit in the first half of 2022 for the first time since 2017. However, it dipped back into the red in FY2022 with a loss of 664 million Hong Kong dollars (67 million pounds). Since then, the company issued several profit warnings and wrote a loss of 714 million Hong Kong dollars in the first half of 2023.

Esprit