Esprit considers exiting Greater China market to revive struggling business

Esprit, the once-booming clothing brand, is in talks to sell its entire Greater China business, including Taiwan and Hong Kong, in a bid to raise much-needed capital and restructure its operations. The company, which has been struggling financially, is reportedly in the final stages of negotiations with an unnamed third party for a potential deal worth 47.5 million dollars.

The sale would include all of Esprit’s trademarks and key domain names associated with the brand in mainland China, Hong Kong, Macau, and Taiwan. The Greater China region has been a loss-making one for the company, prompting it to seek alternatives.

The proceeds from the potential sale are expected to be used for internal investments within the Esprit group. This follows a similar strategy undertaken in Europe, where the company announced a shift towards a wholesale and e-commerce model after closing down unprofitable physical stores.

Esprit’s financial woes are not new. The company has been grappling with losses for several years. In 2023, Esprit reported a net loss of 1.9 billion Hong Kong dollars (243 million dollars) and filed for insolvency at a German court, citing rising costs and a difficult European market. It was the second time in four years that Esprit’s German subsidiaries had entered administration.

Analysts say Esprit’s struggles stem from a combination of factors, including increased competition. The fashion retail landscape has become increasingly crowded, with established and emerging brands vying for market share. Changing consumer preferences are also said to be at play. Consumer tastes have evolved, and Esprit may not have adapted adequately to these shifts. Finally, there are the ever-present global economic headwinds: the ongoing pandemic and international conflicts have disrupted supply chains and dampened consumer spending.

Esprit’s decision to exit the Chinese market is a significant one and reflects the intense pressure the company is facing. With this move, Esprit hopes to generate capital for internal restructuring and potentially revive its operations in other regions. However, the success of this strategy remains to be seen.

Ultimately, Esprit’s future will depend on its ability to adapt to the changing retail landscape, address its underlying challenges, and regain consumer confidence.

This article originally appeared on FashionUnited.FR. Translation and edit by: Rachel Douglass.