Esprit Holdings (0330), which is set to release annual results on Wednesday, is expected to see net profit drop up to 20 percent due to the sluggish European economy, analysts say.
"With negative operating leverage in the key European segment, we expect margins to deteriorate from 20.7 percent in 2008 to 16.7 percent in 2009. We are expecting flat revenue growth overall," said Macquarie analyst Mohan Singh. He projects the fashion giant to post a 20.15 percent decline in net income to HK$5.15 billion for the year ended June 30, from the previous year's HK$6.45 billion.
CIMB-GK analyst Renee Tai said Esprit, which generates more than 80 percent of its income from Europe, will benefit from the weakened US dollar. "Apart from the currency factor, its operation has no particular improvement from the third quarter," Tai said.
Esprit revealed its turnover for the nine months ended March 31 slipped 2.1 percent to HK$27.77 billion, with its wholesale business falling 8 percent, while retail grew 5.9 percent.
Marisa Ho at Credit Suisse predicts Esprit's net profit will tumble 20.3 percent to HK$5.14 billion.
