Esprit Holdings Ltd., the once high-flying Hong Kong fashion retailer before it tumbled into years of losses, is planning a comeback in Asia, pivoting away from a fast-fashion strategy where it failed to compete with brands such as Zara and H&M.
The company is now focusing on better-quality clothing that’s more expensive than fast-fashion apparel but more sustainable, Chief Executive Officer William Pak said in an interview with Bloomberg Television on Monday. It’s also returning to Asia after closing all 56 stores in the region in early 2020 amid Covid-induced lockdowns.
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A pop-up store opened in Seoul in April, and another pop-up is set to open in Hong Kong’s Causeway Bay shopping hub next month.
While the focus will remain on e-commerce, the company wants to have at least one signature store in key Asian markets where it also has an online presence, Pak said. It has launched online platforms in South Korea, Hong Kong, Taiwan and the Philippines, and plans to expand into mainland China, Singapore, and Thailand by the end of the year.
Esprit’s changing strategy comes as the fast-fashion model faces increasing criticism over environmental, social and governance issues such as wastefulness, questionable sourcing of materials and sweat-shop manufacturing. The company, which became a global household name in the 1980s and 1990s, is hoping to create a clean and youthful image to return to those heydays of double-digit growth.
“We are really targeting exponential growth of revenue, Pak said. “Esprit is not fast fashion, and it took a long time for this to be realized in the company.
Still, Esprit faces an uphill battle winning back market share in Asia, one of the world’s most competitive fashion markets crowded with global giants who are expanding aggressively physically and online. While many fast-fashion brands like Zara and H&M are already switching to focus on sustainability, it also faces the rise of ultra-cheap online platforms such as China’s Shein, which is eyeing an initial public offering in the US as soon as 2024.
In its shift toward sustainability, Esprit has reduced its fashion cycles from 12 collections a year to just four, supplemented with limited-edition collections with other partners. It’s also moved its headquarters back to Hong Kong to streamline communications and logistics, because most of the company’s suppliers are in Asia.
The strategy helped Esprit turn profit in 2021, the first in five years, with net income of HK$381 million ($48.5 million).
Founded in 1968 by Susie and Doug Tompkins in San Francisco, Esprit went global in the 1970s after the couple met Hong Kong businessman Michael Ying, who found Chinese suppliers for the group. In 1996, Esprit was taken over by private-equity investors Oaktree Capital Management Corp. and Cerberus Partners LP, who shut the brand’s US standalone stores and catalog business.
As US sales declined, Esprit’s Asian unit grew. Esprit Far East, a Hong Kong-based unit founded by Ying, sold shares to the public in 1993. In 1996, Ying bought Esprit’s European unit and renamed the company Esprit Holdings Ltd. He paid $150 million for the rights to Esprit in the US in February 2002, uniting all the brands under a single company.
Once a blue-chip company in Hong Kong, Esprit was dropped from the city’s benchmark Hang Seng Index in 2013 after sales plunged.
The stock was fetching HK$1.24 in afternoon trading in Hong Kong, valuing the company at around $447 million.
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