Retailer Esprit seeks speed to return to fashion

Mon Sep 9, 2013 5:05pm EDT
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By Donny Kwok

HONG KONG (Reuters) - Fast fashion, even faster. That's the next target Esprit Holdings' (0330.HK: Quote) CEO Jose Manuel Martínez Gutiérrez is aiming for as the Zara-brand veteran steers the Hong Kong-based clothing retailer through a $2.3 billion turnaround.

When Esprit brought in Martinez from Zara's owner Inditex (ITX.MC: Quote) last year, investors gave him a resounding vote of confidence and drove Esprit shares to notch their biggest one-day gain in 14 years.

He has so far cut inventories, brought in four of his former Zara colleagues and announced plans to shut down 16 Esprit stores, mainly in Europe, this fiscal year while maintaining a strong presence in China.

Martinez now plans to slash by a third the time it takes for new products to hit the shelves by simplifying distribution, one of the hallmarks of his tenure at market leader Inditex.

"This is a business which is not rocket science, the magic is if you keep it very, very simple, then it will become very, very effective," Martinez told investors in May, after the company warned of a second-half loss related to store closures and acquisitions in China.

He said clothing should reach stores within 2-3 months of manufacture, and not within 6-9 months, a strategy analysts said could help make Esprit more competitive, but not any time soon.

The company is expected to report its first full-year loss in two decades when it posts fiscal 2013 results on Tuesday, and some analysts said the new management still had its work cut out for it to revive the brand.

"The new management has yet to demonstrate to the market that a revolution is under way," said Steve Chow, analyst at Sunwah Kingsway Group Research.   Continued...

A shirt made by Esprit is displayed at one of its outlets in Hong Kong August 7, 2012. REUTERS/Bobby Yip