Esprit sees hope in new CEO

FRANKFURT, Germany – Fashion retailer Esprit, that recently admitted it had “lost its soul” as it lost customers to rivals such as H&M and Zara, has hired a former Zara manager to try and turn its fortunes around.

Jose Manuel Martinez is a 42-year-old Spaniard and the former manager of Inditex (the world’s leading fashion retailer which owns the Zara brand). He is to take over as Esprit’s new chief executive, replacing Ronald Van der Vis who quit in June.

The announcement sent Esprit shares (listed on the Hong Kong stock exchange) soaring by as much as 28%.

But analysts warn investors against pinning their hopes too high.

“The appointment is positive, but it’s still only a first step,” said Deutsche Bank analyst Anne Ling. Her colleagues at Bank of America-Merrill Lynch predict that Martinez has a “long and bumpy road” ahead of him.

Esprit is not doing well.

Last year, its operating profit shrank to just 70 million euros (US$86-M) from close to 400 million euros a year earlier, owing to the cost of a 1.7-billion-euro restructuring programme which will weigh on profits again this year and next year.

At the same time, rivals Zara and H&M are continuing to grow.

On its website, Esprit boasts it is “an international youthful lifestyle brand offering smart, affordable luxury and bringing newness and style to life.”

It operates more than 800 directly-managed retail stores in more than 40 countries worldwide.

But outgoing CEO Ronald Van der Vis complained that the group has “gradually lost its soul in recent years.”

In its drive to expand internationally, the “brand’s heritage has been neglected and customers were no longer the center of attention,” he said.

Esprit is a long way from its beginnings in 1968 when its founders, hippies Douglas and Susie Tompkins — who also set up the North Face brand — sold their clothes from a VW camper van in California.

But the Tompkinses left long ago, and Esprit has been listed in the Hong Kong stock exchange since 1993. Its dual headquarters were established in Ratingen near Duesseldorf in Germany and in Hong Kong.

Sales have been in decline since mid-2008, with its fashion collections failing to capture customers’ imagination.

The departure of its main designer in 2008, Korean-American Melody Harris-Jensbach, did not help.

Ronald Van der Vis tried to turn the group around by launching a worldwide restructuring last year, including the closure of more than 170 unprofitable stores in North America, Spain, Sweden and Denmark.

At the same time, Esprit is focusing its energies on its main European markets where it plans to open 185 new stores by 2015: Germany, Austria, Switzerland, France and the Benelux. 

Esprit is looking to rejuvenate its image with new concept stores.

Another part of its offensive will be China, its second biggest market after Germany. The goal is to increase the number of sales outlets to 1,900 by 2015 (from around 1,000 at present).

Finally, Martinez is hoping to recapture some of Esprit’s “soul” with the return of Harris-Jensbach to the company. – Etienne Balmer, Agence France-Presse