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Focus on China

September 16, 2011

Back in the 1980s, clothes from Esprit were en vogue. But those days are long gone: Profits have plummeted as consumers have fled the brand.

Esprit shop in Bremen, Germany
'The brand has lost its soul,' says Esprit's CEOImage: Sterilgutassistentin

Esprit is retrenching from the United States, where it launched its fashionwear business more than three decades ago, as well as Spain, Denmark and Sweden in a move to stem losses.

The fashionwear maker posted a 98 percent drop in profits for its business year ending June 30.

In 1968, Susie and Doug Tompkins started selling Esprit clothes out of the back of their station wagon. The company incorporated in San Francisco in 1971 and shortly after formed a partnership in Hong Kong.

Germans think of Esprit as a German company

Later in the decade, Esprit launched in Germany under the name Esprit de Corp. The bulk of its revenue is generated today in Europe, particularly in Germany.

Esprit-founder Douglas Tompkins
Douglas Tompkins and his wife started Esprit togetherImage: picture-alliance/ dpa

They heyday of Esprit in Germany was in the 1980s when the first store opened in Cologne. Even today, many Germans think of Esprit as a German brand, with its European headquarters located in Ratingen near Düsseldorf and the Düsseldorf soccer stadium named "Esprit Arena."

Germany hosts the largest Esprit store, the "World of Esprit," in Frankfurt, and the company plans to open a new distribution center in Mönchengladbach, near Düsseldorf, in 2012.

But despite popular perception, "Esprit has never produced anything here in Germany," Thomas Rasch, head of the German fashion industry's association German Fashion, told Deutsche Welle.

'The brand has lost its soul'

In 2002, Hong Kong-based Esprit Holdings Ltd., which is listed on the Hong Kong Stock Exchange, consolidated the brand into a single entity by purchasing the US trademarks and the remaining interests in Esprit International.

Esprit Arena in Düsseldorf, Germany
Düsseldorf's soccer stadium is named after EspritImage: picture-alliance/ dpa

Esprit shares plunged in Hong Kong by about 20 percent on Friday after the company posted a worse-than-expected drop in full-year net profit. Earnings plummeted 98 percent to 7.45 million euros ($10.7 million) from 400 million euros . They were impacted largely by provisions made for expenses related to the upcoming store closures.

"The brand has gradually lost its soul over the past few years," CEO Ronald van der Vis conceded in a statement.

An industry expert familiar with the industry agrees: "Be it products, marketing or pricing - Esprit simply hasn't done a good job on these fronts for the last few years," the expert told Deutsche Welle.

Globally, Esprit competes with Swedish retailer Hennes & Mauritz, better known as H&M, and Zara's parent company, Spanish Inditex.

Trying to get back on track

In order to get back on track, CEO Ronald van der Vis aims to focus on growing markets.

In addition to strengthening its European business in Germany, Austria, Switzerland, France and the Benelux countries, Esprit plans to concentrate on expanding in Asian countries, particularly China. The company plans to open a total of 185 new retail stores over the next few years.

Author: Andrea Rönsberg
Editor: John Blau