The board of directors of Esprit Holdings Limited announces the consolidated results of the Company and its subsidiaries for the year ended 30 June 2013 together with comparative figures for the year ended 30 June 2012.
As expressed in our Interim Report for the six months ended 31 December 2012, the combination of external and internal challenges has had considerable impact on the Group’s performance this year. For the financial year ended 30 June 2013, Group turnover amounted to HK$25,902 million (2012: HK$30,165 million), representing a -14.1% decline from the same period last year; which was attributable to:
i) Strategic decision to divest North American operations and the closure of certain loss-making stores as announced in prior financial years
ii) Decline in wholesale and retail turnover due to weak performance in most markets
iii) Negative impact of foreign exchange effect excluding the impact from currency exchange rates, the Divestment of NA and the Store Closures, turnover from the core businesses of the Group declined by -7.7% year-on year.
This percentage decline in turnover was -6.4% in the second half of the financial year versus the -8.8% decline in the first half of the financial year.
The Group markets its products under two brands, namely the Esprit brand and the edc brand. In FY12/13, turnover from Esprit and edc branded products represented 76.0% (2012: 75.1%) and 24.0% (2012: 24.9%) of Group turnover respectively.
Turnover from Esprit branded products reported a -10.5% year-on-year decline in local currency. The results among the twelve product divisions of the Esprit branded portfolio were mixed. In general, we observed a more favorable development of the Collection divisions (more dressed up than the Casual lines). In fact, on a positive note, Women Collection, the third largest product division under the Esprit brand, contributed 11.1% (2012: 9.5%) of Group turnover and recorded a year-on-year turnover growth of +3.3% in local currency.
Also worth mentioning is the introduction of our Denim division as an opportunity to grow in the under-penetrated denim segment. Since the delivery of its first collection during the First Half, the reporting of Denim products sales was carved out from Women Casual, Men Casual, Women Collection and Men Collection.
The Trend division was also launched during the financial year with its first collection delivered to selected retail stores in Europe in July 2012. These two new divisions represented 2.5% and 0.9% of Group turnover in the current financial year respectively.
Due to the carving out of Denim’s turnover from existing divisions (Women Casual, Men Casual, Women Collection and Men Collection), and the effect of the Trend division against Women Casual and Women Collection, it is more meaningful to interpret their performances together with Denim and Trend as a whole. In FY12/13, the total turnover from Women Casual, Men Casual, Women Collection, Men Collection, Trend and Denim amounted to HK$14,433 million as compared to HK$16,539 million in FY11/12, representing a year-on-year decline of -10.3% in local currency.
As for the rest of the Esprit brand divisions, Kids’ 18.2% turnover growth in local currency is due to an internal change in the classification of product lines. Excluding the impact of this change, the division had a sales decline mostly caused by the reduction of selling space. Shoes and Body wear presented quite stable figures relative to the overall performance. Finally, Sports and de. corp. presented the largest decline as a result of the internal decision to reduce these lines.
The turnover from edc branded products reported a decline of -14.6% year-on-years in local currency. This underperformance is partly attributable to the slightly higher mix of wholesale turnover (40.9%) as compared to the Esprit brand (38.2%) and to the larger impact of the reduction of selling space in the Retail stores of the Group.
Retail turnover amounted to HK$15,652 million (2012: HK$17,806 million) and decreased by -12.1% year-on-year. Excluding impact from currency exchange rates, the Divestment of NA and the Store Closures, retail turnover declined by -3.5% year on year. This decline is mainly attributable to a comparable store sales decline of -3.3% as a result of a significant decline of footfalls in our stores. Comparable stores represented approximately 40% of total retail space.
Tactical sales activation initiatives were more ambitious since the middle of the financial year 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 in local currency (First Half: -5.1%).
We are encouraged with this development that was observed in both Europe and the Asia Pacific regions. Excluding impact from the Store Closures, the retail turnover decline in Europe and the Asia Pacific narrowed in the Second Half to-1.4% (First Half: -4.9%) and -2.2% (First Half: -5.5%) in local currency respectively.
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:-0.2%).
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