The effects of geopolitical challenges, particularly in Europe have severely hindered consumer confidence. Credit: Shutterstock.

Esprit‘s profit warning outlines a net loss increase of 186.3% compared to the net loss of approximately HK$664m recorded in the previous year ending 31 December 2022.

The retailer explained its revenue decreased by 16.3%, from HK$7.063bn in 2022 to HK$5.912bn in 2023.

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This decline in revenue is attributed to various factors including:

  • The unfavourable macroeconomic environment in Europe, particularly in Germany characterised by high interest rates due to high inflationary pressures
  • Ongoing geopolitical tensions worldwide, particularly the conflict in Ukraine
  • High energy costs, particularly in Germany, which have impacted consumer purchasing power.

The combined effect of these challenges are believed to have “severely hindered” consumer confidence, particularly in Europe where Esprit primarily operates, resulting in decreased discretionary spending and ultimately, a decline in total revenue.

The company’s gross profit decreased by 12.9% from HK$2.878bn to HK$2.508bn in 2023. This decrease is partly attributed to write-backs of provisions for inventories and provisions for impairment of trade debtors, totalling HK$321m in the comparison year while experiencing impairments of HK$102m in 2023.

This announcement follows the retailer reporting a 17% decline in sales back in August and a shift to negative financial territory in the six months ended 30 June.

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At the time Esprit cited its performance woes to the challenging economic climate and the ongoing Ukraine war as factors contributing to its setbacks.

Esprit pointed out it is still in the process of finalising its consolidated results of the group for the year.