Esprit revamps mainland China business with Mulsanne JV
today Dec 2, 2019
Under-pressure fashion retailer Esprit is aiming to reset its approach to China with the launch of a joint venture to take over retail and marketing of the brand in the country.
The company, which is listed in Hong Kong, has linked up with Mulsanne Group, another Hong Kong-listed firm. Esprit will hold a 40% stake in the JV through its Million Success subsidiary with Mulsanne holding a majority stake in the business. The deal is for the mainland only and won’t include Hong Kong, Macau or Taiwan.
Esprit company secretary Patrick Lau Yiu Pong said in a stock exchange filing on Sunday that mainland China was “an important pillar” of its strategic growth plan.
Mulsanne is an investment holding company and works with brands to operate over 2,000 stores in China so has strong experience of the fashion market there.
It will take some time to set up the venture with the launch expected next summer, as long as it gets the required regulatory approvals within China.
So what will it actually mean for the company? Clearly, the aim is for it to grow faster. But in the short term, Esprit will close some of its mainland stores that are performing below expectations before the remainder of its assets will be transferred to the new JV.
The filing also said “the directors believe that the deal creates a strong base for the Esprit brand to improve relevance and accelerate growth.”
And that growth is certainly needed with Esprit having underperformed for some time and struggled to drive meaningful growth.
Linking with Mulsanne could pay off strongly for the firm whose business in China is still quite small and is struggling. In its latest full financial year, its mainland China sales made up less than 4% of its total and fell in double-digits.
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