If the euro continues to devalue harshly, Esprit as one of the world’s top apparel brands said it may ponder on increasing prices in Europe as pressure continues to stack further for retailers in a constituency where unstable exchange rates at present have consumed into returns.
“The declining euro is posing a threat to us,” chief executive officer of fashion house Esprit Holdings said Jose Manuel Martinez Gutierrez “Our profit growth last year could have been stronger if it were not for the weakening euro.” He added.
The China based retailer has its biggest market in Germany. For years, Esprit struggled with the maintenance of its sales growth and just recently it was able to rebound as it is now one of the best apparels company competing with the likes of its rivals H&M, Zara and Uniqlo.
For the first time in two years, the stock’s Net profit for the six months ended December did not disappoint as it rose to a positive territory, at HK$61 million or US$7.86 million. This also marks the utmost provisional earnings the clothier company has released in years.
The redemption was possible with the help of former Zara veteran Martinez, who provided a strategic revamp for the clothing giant. Martinez has predicted that Esprit can go into a bankruptcy from a number of money-losing stocks across Europe, while revamping its e-commerce manifestation, predominantly for tech-savvy Asian customers since 2012. As an outcome of a veer of cost control processes, Esprit’s unswervingly accomplished store system in which has been reduced by over a third from its elevation ever since.
“Now we are seeing our transformation starting to pay off,” Stated Martinez
The redemption can also lead to a global expansion, specifically adding more stores as that will expand its demographics as well, he noted. Such act is a first for the company because it never considered expansion since its opening.
Esprit displayed revenue plunge of 9.9 per cent for the six months ended December, pulled down by a severe decline in advertising promotions in its home market. Optimistically, Martinez said that a rebound is also expected in the Asian market.
But the repeated decrease in the euro might also take a toll on the Esprit, which is currently affected and is trying to turn things around for the better.
“Many European retailers purchase goods in US dollars but sell in euro,” said Martinez, about the euro weakening.
“When Donald Trump was elected president we expected the US dollar to weaken, but the opposite happened,” he said. “We may have to revise our pricing in Europe if the currency there drops to a certain level [in the coming year].”
For the preceding six months, the euro plunged 6.9 per cent alongside the US dollar, with economists foreseeing more descending pressures postured by a raft of imminent European elections in a year of party-political vagueness.
Esprit Holdings Ltd. had an impressive upsurge in its recent trading. The apparel stock started yesterday at the 0.75 – 0.80 range before jumping to the 0.90 territory. Esprit trade’s opened on its low of 0.92 and finished at its high of 0.99. RSI is close to reaching the overbought range if Esprit continues its bullish trend. Currently, the stock is at 63.78. Coppock curve is also diverging in the 10’s range. It is currently at 9.73 which indicates a buy for the stock.
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