Esprit announces drastic restructuring, renewed focus on China, wholesale
today Nov 26, 2018
Clothing chain Esprit announced a major shake-up in a presentation for investors on Monday as it admitted that its brand identity has become inconsistent and out of touch.
The wide-ranging turnaround strategy will see the brand attempt to bring back the “iconic” status it had in the 80s and become known for creating “products, experiences and a brand that lifts the spirit”.
The clothing assortment will be reduced 20-30% from June 2019 to avoid diluting the brand and cut development costs, and the offering will be built around “signature product categories” such as jeans, men’s chinos and t-shirts.
Additionally, there will be a renewed focus on wholesale with a digital tool introduced to make ordering easier for wholesale partners and reduce time-to-market for new collections.
And the Asian market, particularly China, is set to become more predominant for the business. In China, Esprit is planning to open 220 stores by 2023, and 78 further openings are planned for the rest of Asia over the next five years. A new store concept is scheduled to launch there in August 2019.
To rebuild its presence in China, Esprit has formed a dedicated design team that will create adapted collections for the Asian consumer, putting a greater emphasis on fit and softer fabrics such as cashmere, wool. And its e-commerce activities will be boosted with a stronger partnership with Tmall, launches on further marketplaces, and a revamped Esprit online store.
The company has also identified the omnichannel approach as a key way forward, as consumer behaviour continues to shift towards online shopping. In addition to being customer focused, it plans to use data to give customers what they want and track the success of its initiatives.
But how exactly is Esprit going to achieve all this goals? The company said 40% of its non-store jobs will be cut to eliminate overlapping functions and streamline its operations. Five offices will be merged into one HQ and the executive management team will be reduced by half from 13 to 6 executives.
Whilst Esprit expects a low double-digit revenue decline in the current financial year, it hopes these initiatives, plus a review of its store estate, will help it break even in 2-3 years. But the restructuring and closure of loss-making stores will translate into one-off costs of $1.5- $1.7 billion HK dollars this year.
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