* H1 net HK$555 mln vs HK$193 mln forecast

* H1 wholesale rev down 11.7 pct, retail down 1.1 pct

* Shares jump 25 pct to five-month high (Add comment, details)

By Donny Kwok and Rachel Lee

HONG KONG, Feb 23 (Reuters) - Esprit Holdings Ltd , the struggling Asian retailer focused on crisis-hit Europe, said plans to restore long-term profitability were on track, sending its shares up 25 percent to a five-month peak.

The company depends on Europe, where a deepening debt crisis has battered demand, for about four-fifths of its sales. First-half net profit fell 74 percent, it said on Thursday, a smaller drop than analysts had expected.

"Going into the second half of the financial year, we will continue the rigorous and systematic implementation of our transformation plan in a continued challenging business environment," it said in a filing to the Hong Kong bourse.

Esprit, whose rivals include Sweden's Hennes & Mauritz AB , U.S. group GAP Inc and Spain's Inditex SA , is in the midst of a costly restructuring after its chief financial officer resigned and the company admitted late last year that its brand had "lost its soul". .

Esprit said on Thursday the company continued to face economic challenges, especially in Europe where reduced consumer confidence and restricted credit had hit its wholesale business and expansion.

It also blamed high raw material costs and said it was in the process of setting up new sourcing offices in Indonesia and India, which would open in the second and fourth quarters of 2012, respectively.

SHARES SURGE

Shares in Esprit, which has fallen in rankings to become Asia's No.7 apparel retailer by market value from third place a year ago, made their biggest single-day gain in percentage terms since January 1998. They have risen more than 77 percent this year.

"It (the results overall) gave investors confidence that the transformation plan was on track to produce fruitful results," said Daniel Wong, an analyst at Oriental Patron Financial Group.

Analysts said the operating margin of about 4-5 percent due to cost-saving measures was unexpected and stronger than the company's guidance of about 1-2 percent for the full year.

Esprit's shares plunged 73 percent in 2011, weighed down by scepticism over its turnaround plan, lagging a 20 percent fall in Hong Kong's benchmark index.

The fashion group said it aims to double sales and points of sales in China by June 2015. It said in September that it wanted to double China sales to HK$6 billion ($772.12 million) over the next four years and expand its point-of-sales network to 1,900 from 1,000.

Its number of directly managed stores rose by 27 to 1,168 as of the end of 2011, with 314 of these in China, an increase of 14. It expects its first e-shop in Asia Pacific to commence operations in China in the second half of the financial year.

Esprit said it now had a presence in 194 Chinese cites, up from 185 as end June 2011 and would accelerating expansion in the second fiscal half.

The company is on track to close its directly managed stores in North America by end-March 2012 and will continue to look for a licensing partner.

Esprit had said earlier it was in the process of closing its stores in that region and may eventually close all its outlets there if it failed to find a partner to take care of the business.

EARNINGS BEAT FORECASTS

Esprit, which sells everything from bed sheets to jeans, reported a net profit of HK$555 million ($71.57 million) for the six months ended December. Its earnings have fallen for nearly four years in a row.

The result beat an average estimate of HK$193 million from three analysts polled by Thomson Reuters, and was lower than a net profit of HK$2.14 billion a year earlier.

Analyst forecasts ranged from a HK$391 million profit to a HK$5 million loss.

Turnover fell to HK$16.70 billion during the six-month period from HK$17.69 billion a year earlier.

Revenue from its retail business eased slightly to HK$9.84 billion from HK$9.96 billion a year earlier, while wholesale revenue fell to HK$6.73 billion from HK$7.62 billion.

Esprit, which also competes in Asia with Japan's Fast Retailing, has said it is investing more than HK$18 billion in the company until its fiscal year ending 2015 to rebuild its brand. ($1 = 7.7551 Hong Kong dollars) (Reporting by Donny Kwok and Rachel Lee; Editing by Jacqueline Wong and Erica Billingham)

First Published: 2012-02-23 07:03:58
Updated 2012-02-23 14:29:45





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