Esprit May Spend $1 Billion to Buy Luxury Fashion Brand by 2008

By Nikola Kemper and Ting Ting Ng

Esprit Holdings Ltd., a Hong Kong- based clothing retailer with shops in more than 40 nations, plans to spend $1 billion to acquire a luxury brand by next year to improve product quality.
``I would like to integrate such a brand as a better sister of Esprit and as a role model to access good designers who normally wouldn't want to work for Esprit,'' Chief Executive Officer Heinz Krogner said in Hong Kong. ``It doesn't need to be a huge company and it should not dilute earnings. We aim to buy knowledge of the luxury segment, not revenue.''
Esprit's profit in the six months ended Dec. 31 surged 28 percent to HK$2.4 billion ($307 million) on 25 percent more sales from Europe. The company aims to open a new store, including franchised outlets, every day in the year from July, Krogner said.
Inditex SA, Europe's biggest clothing retailer, has more than tripled in size in six years to 3,200 stores. The Spain- based retailer is also opening at least one store a day, aiming to add as many as 520 stores in the year to January.
Hennes & Mauritz AB, Europe's second largest clothing retailer, planned to add 95 new stores worldwide in six months. Profit in the three months ended May rose 31 percent on sales from 1,400 stores in 28 countries.
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Esprit aims to boost sales by two-thirds to $5 billion by 2009 and add 400 stores in three years. Currently, it generates about 86 percent revenue from Europe with Germany the biggest single market. Sales from Asia Pacific account for 11.6 percent of the group's total with the rest from North America.
``Our focus is to maintain double-digit growth in Europe, increase the growth in Asia to more than 20 percent and do the same in America,'' said Krogner. ``Asia and America have to grow faster than Europe because they are relatively small at this moment but the potential is as good as in Europe.''
The company invests $20 million a year in North America to boost growth in the region.
Esprit's venture business in mainland China reported a 50 percent surge in profit on 34 percent more turnover last year through 730 self-operated and franchised stores, according to the annual report of China Resources Enterprise Ltd., which holds 51 percent of the venture.
The retailer owned 12,090 wholesale distribution channels, 638 directly managed retail stores under the brands Esprit, edc and cosmetic trademark Red Earth by the end of last year.

Source: Bloomberg.com