Esprit Holdings’ chief executive took an optimistic note as the company embarked on a global expansion, predicting that the worst may be over for fashion retail, despite rising inflation and pressure on the supply chain.
William Pak said the fashion house was making an ambitious comeback by returning to the US, Australia and mainland China, opening new stores in Shanghai and Los Angeles early next year.
Esprit, a Hong Kong-listed fashion retailer that reached its heyday in the 1980s and 1990s, posted its first profit in five years with net income of HK$381 million ($48.5 million).
Part of the new strategy was to move away from fast fashion giants such as Zara, H&M and China’s Shein and focus on producing more expensive, higher quality clothing.
“This year may be the bottom end of the retail market,” Pak told the Financial Times on Friday in an interview at the company’s Hong Kong headquarters. “We need to bring this to the fore and not wait and be reactive.”
Pak said indicators such as the June US Producer Price Index, which tracks the prices companies receive for their goods and services, are a sign “that inflationary pressures will soon ease.”
The company said it hopes to win over China’s Generation Z population with more localized products that cater to the patriotic trend of “China chic.”
Founded in 1968, the HK$3.3 billion ($420 million) group had grown into one of the world’s most recognizable brands, but struggled to compete with fast fashion retailers.
Over the past decade, Esprit was forced to exit the markets in North America, Australia and Asia. It closed hundreds of outlets because the CEO admitted the brand had “lost its soul”.
Most retail sales at Esprit last year came from Europe, with more than a third of the stores in Germany. Part of its changing strategy is to reduce the number of fashion collections it releases each year and increase the quality of the clothing.
The fashion retailer, which moved its headquarters to Hong Kong last year, has gradually returned to Asia since February, launching online stores only in South Korea, Hong Kong, mainland China, Taiwan, the Philippines, Singapore and Thailand. Brick-and-mortar stores will open in the US, Canada, Australia, Hong Kong and mainland China after a pop-up store opened in South Korea this year.
Mainland China’s expansion comes as fast fashion titles leave the country under the strict zero-Covid regime.
Inditex, Zara’s parent company, is withdrawing its brands, including Bershka, Pull & Bear and Stradivarius, after closing physical stores, while American Eagle Outfitters closed its e-commerce stores.
“Once we are open, we can create a local specific capsule for mainland China. We can also do the designs locally,” says Pak about China, where Esprit once had more than 300 stores.
Pak said the company has “no specific target” in terms of revenue distribution in mainland China and Asia, but will see markets grow “gently” on its way to win back customers.