The licensing model, it adds, allows it to leverage its brand without the substantial capital expenditure required for manufacturing, distribution, and retail operations. This results in a more asset-light and scalable business model. Credit: Shutterstock.

Esprit said during FY23 its licensing revenue reached HK$121m ($15.48m).

“With the right strategic partners in place, there is significant growth potential in this licensing-focused business model,” it says.

The licensing model, it adds, allows it to leverage its brand without the substantial capital expenditure required for manufacturing, distribution, and retail operations. This results in a more asset-light and scalable business model.

In addition, it allows stable revenue streams and operational efficiency as well as market diversification.

“Furthermore, each geographic region can further be segmented into individual product categories, where specialised operators in each segment can ensure product quality and efficiency. This approach has the potential to drive revenue growth in a way that a single, generalised operator may not be able to achieve,” it adds.

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Esprit said the recent financial situation of the subsidiaries was greatly impacted by the insolvency proceedings of the group’s companies, as well as the poor performance of the group. While it had engaged sourcing agents who are paid directly by HKRP which would then ordinarily recoup the costs from the German subsidiary, the insolvency proceedings the German arm is currently going through meant payment was unmet and HKRP was unable to recover the fees it had paid out.

Earlier this month, Esprit ended discussions with a potential bidder for its China business due to the offer not being commercially viable and has confirmed it was looking at its other proposals.

Esprit also announced in June a plan to execute a new business model focused on wholesale and ecommerce in Europe following the closure of all its loss-making operations in the region.

It had previously been reported to be looking for potential investors to rescue the European arm of its business and the news came as Esprit warned of a HK$1.9bn net loss for 2023 due to a tough European market.

In May it filed for bankruptcy with a German court for its European subsidiaries, citing poor finances on the back of increased costs following the pandemic and international conflicts.

It marked the second time Esprit has filed for administration for its German subsidiaries in four years.

At the end of last year, Esprit issued a profit warning after it incurred a net loss of HK$1.9bn ($243m) for the year ending 31 December 2023.