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If fashion is all about making a statement, then getting the right message to investors should just be part of a retailer’s very fabric. Esprit has made the first step in doing this, hiring a chief executive whose record comes from a company that is getting the fashion bit right: Inditex. Now just to fix Esprit’s supply chain, its fashion and its public image.
Nailing its investor presentation on Tuesday was a crucial step. Back in June it lost its chairman and chief executive in the space of 24 hours for separate “personal reasons” but took 24 hours to give any further explanation. The one-fifth drop in its shares was only fitting: if a company cannot better explain why its new, energetic 40-something CEO wants to “pursue other interests” in the middle of leading a restructuring, then it does not deserve trust.
Still, investors seem to have put their faith in incoming chief executive Jose Manuel Martínez Gutiérrez, another 40-something. Tuesday’s 28 per cent share surge has returned the price to near its pre-resignation levels. He still faces a huge task. Restructuring efforts, which begun in September, have yet to show through in Esprit’s numbers – earnings per share fell by three quarters for the six months ending in December. And it remains tied to a wholesaling unit (two-fifths of sales) which requires fashion bets far in advance. Still, Mr Martinez’s fast-fashion experience with Inditex should help to change that.
But Mr Martinez has a task even more pressing than Esprit’s business model: defining what it stands for. Fashion retailers must make statements every bit as strong as their customers might make with their clothes. This is a retailer with an American heritage yet no US stores. It is Hong Kong-listed with a German headquarters. It gets four-fifths of sales in Europe but sees its future in China. Mr Martinez’s first task is to define Esprit’s, well, spirit.
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