Business | Retail

Esprit loses customers to rivals

Fashion chain hires a former Zara manager to turn its fortunes around

  • AFP
  • Published: 13:50 August 13, 2012
  • Gulf News

  • Image Credit: AP
  • Customers select a T-shirt at a Esprit store in Hong Kong. The company announced Jose Manual Martinez Gutierrez, a top executive from the Spanish company that owns Zara, will take over as chief executive officer of Esprit.

Frankfurt: Fashion retailer Esprit, which recently said it had “lost its soul” as it lost customers to rivals such as H&M and Zara, has hired a former Zara manager to turn its fortunes around.

Jose Manuel Martinez, a 42-year-old Spaniard and former manager of Inditex, the world’s leading fashion retailer which owns the Zara brand, is to take over as Esprit’s new chief executive replacing Ronald van der Vis who quit in June.

The announcement sent Esprit shares, which are listed on the Hong Kong stock exchange, soaring by as much as 28 per cent.

But analysts warned investors against pinning their hopes too high.

“The appointment is positive, but it’s still only a first step,” said Deutsche Bank analyst Anne Ling.

And her colleagues at Bank of America-Merrill Lynch predicted that Martinez has a “long and bumpy road” ahead of him.

Esprit is, indeed, not doing well.

Last year, its operating profit shrank to just 70 million euros (Dh315.89 million) from close to 400 million euros (Dh1.81 billion) a year earlier, owing to the cost of a 1.7-billion-euro restructuring programme which will weigh on profits again this year and next year.

At the same time, rivals Zara and H&M are continuing to grow.

On its website, Esprit boasts it is “an international youthful lifestyle brand offering smart, affordable luxury and bringing newness and style to life.”

It operates more than 800 directly managed retail stores in more than 40 countries worldwide.

But outgoing CEO Ronald Van der Vis complained that the group has “gradually lost its soul in recent years.”

In its drive to expand internationally, the “brand’s heritage has been neglected and customers were no longer the centre of attention,” he said.

Esprit is indeed a long way from its beginnings in 1968 when its founders, hippies Douglas and Susie Tompkins — who also set up the North Face brand — sold their clothes from a VW camper van in California.

But the Tompkins left long ago. And Esprit has been listed on the Hong Kong stock exchange since 1993, with its dual headquarters in Ratingen near Duesseldorf in Germany and in Hong Kong.

Sales have been in decline since mid-2008, with its fashion collections failing to capture customers’ imagination.

The departure of its main designer, the Korean-American Melody Harris-Jensbach, in January 2008 has not helped.

Ronald Van der Vis tried to pull the group around by launching a worldwide restructuring last year, including the closure of more than 170 unprofitable stores, notably in North America, Spain, Sweden and Denmark.

At the same time, Esprit is focussing its energies on its main European markets where it plans to open 185 new stores in Germany, Austria, Switzerland, France and the Benelux countries by 2015.

It is looking to rejuvenate its image with new concept stores.

Another part of its offensive will be China, its second national market after Germany, where the number of sales outlets will be increased to 1,900 by 2015 from around 1,000 at present.

Finally, Martinez is hoping to recapture some of Esprit’s “soul” with the return of designer Melody Harris-Jensbach.

Regaining trust

28%

shares soar on Hong Kong exchange after new CEO is named.

€70m

operating profit last year which shrank from €400m.

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