Esprit group turnover dips 11.5% in FY 12/13

i) Significantly reduce operating costs – especially on the more controllable cost items such as advertising & marketing expenses and staff costs;

ii) Reduce inventory – by measures including adjusting buying quantities, clearance promotions and markdowns, as well as a net opening of 12 discount outlets during the financial year for better inventory management; and

iii) Selectively and moderately deploy CAPEX – which led to a 35.3% reduction in CAPEX to HK$919 million from HK$1,420 million in the previous year.

These efforts enabled the Group to generate positive cash inflow from operations of HK$674 million in the second half, versus a first half cash outflow from operations of HK$1,091 million.

In terms of driving top line, we have continued to implement tactical sales activation initiatives to improve store traffic and conversion rate. These initiatives contributed to the narrowing of the rate of retail turnover decline to -1.6% in the second half of FY12/13 in local currency (first half FY12/13: -5.1%). This improving trend is even more apparent in China, our third largest retail market, where we saw a positive retail turnover growth of 4.4% in the second half (first half FY12/13: -0.2%).

To regain a strong level of competitiveness in the medium term, the priority is to put in place faster and more efficient product related processes in the form of a “high performance product engine” that will enable the Group to adapt quickly to continuous changes in consumer demand and deliver an outstanding value for money proposition.

The objective of this “high performance product engine” is to facilitate Esprit’s ability to more systematically produce successful collections while maintaining profitability. The underlying principle is a higher degree of vertical integration in our business model so that information, decisions and actions flow rapidly across all key areas, including to and from external partners.

Commenting on the results, Mr. Jose Manuel Martínez Gutiérrez (“Mr. Martínez”), the Group Chief Executive Officer of Esprit, said, “…during a difficult year, we have continued to set, step by step, an ambitious course for regaining our competitiveness. We are aware of the great challenge ahead of us but also mindful of the immense potential for Esprit. The second half of the financial year has indicated that we are indeed on the right track. We will remain focused on this path and will continue to work harder on the Company's strategic initiatives.”

Esprit