Esprit may buy luxury brand for US$1b by 2008

ESPRIT Holdings Ltd, a Hong Kong-based clothing retailer with shops in more than 40 nations, plans to spend US$1 billion to acquire a luxury brand by next year to improve product quality.

“I would like to integrate such a brand as a better sister of Esprit and as a role model to access good designers who normally wouldn't want to work for Esprit,'' Chief Executive Officer Heinz Krogner said in Hong Kong. ``It doesn't need to be a huge company and it should not dilute earnings. We aim to buy knowledge of the luxury segment, not revenue.''

Esprit targets the mass market, selling jeans for about 70 euros (US$94) and T-shirts for 20 euros, and aims to open a new store, including franchised outlets, every day in the year from July, Krogner said. The company's profit in the six months ended December 31 surged 28 percent to HK$2.4 billion ($307 million) on 25 percent more sales from Europe, where it gets most of its revenue, Bloomberg reported.

"Buying a luxury brand makes sense because Esprit wants to position itself in Germany at the higher end,'' said Erica Poon Werkun, a Hong Kong-based analyst at UBS. ``Although Esprit targets the mass market, its products are more expensive than their competitors.''

Inditex SA, Europe's biggest clothing retailer, has more than tripled in size in six years to 3,200 stores. The Spain- based retailer is also opening at least one store a day, aiming to add as many as 520 stores in the year to January.

Hennes & Mauritz AB, Europe's second-largest clothing retailer, planned to add 95 new stores worldwide in six months. Profit in the three months ended May rose 31 percent on sales from 1,400 stores in 28 countries.