The results for fiscal year 2018 are in line with previous guidelines. Revenue fell 3.1 per cent year-on-year to HK $15.5 billion. Fixed exchange rate income fell 11.1% compared with the same period last year. The overall gross profit margin fell 0.3 percentage points year-on-year to 51.3%, mainly due to a decline in the share of revenue from retail channels. Conventional operating expenses decreased by 3.3% at a fixed exchange rate compared with the same period last year, but non-recurrent expenses totaled HK $1.344 billion, resulting in a net loss of HK $2.554 billion.

We forecast a loss per share of HK $0.624, HK $0.514 and HK $0.465 for fiscal year 2019-2021, respectively. According to Esprit's new CEO, the company will undergo some "bold changes" in the next few years, including establishing a new business model and restructuring its cost base. However, management still expects revenue in fiscal 2019 to record a low double-digit year-on-year decline, which is worse than our previous forecast. As a result, we cut our revenue forecasts for fiscal 2019 and fiscal 2020 by 6.5% and 10.7%, respectively. As a result of the company's reform measures, there may also be some one-time fees in fiscal year 2019.

Lower the target price from HK $2.30 to HK $2.00 and maintain a "neutral" rating. The company's current business situation is still challenging and even worse than we had expected. Although we believe that the company's new reforms are moving in the right direction and have the potential to bring Esprit back to sustainable growth and profitability, we still choose to be cautious about the actual effects of these measures at this stage. The company's share price already reflects most of the concerns, so we remain "neutral".