According to the Hong Kong-listed company, it is "unviable financially to continue the business as it is currently structured in Germany" and that seven of its German businesses are unable to pay their debts.
In Düsseldorf, Germany, Esprit has declared bankruptcy "under self-administration" for seven of its subsidiaries, Euronews reported.
With one of its two headquarters located in Germany (the other is in Hong Kong), Esprit Holdings is a multinational company with operations in over 40 countries. Esprit Europe GmbH and six other German companies are the subject of bankruptcy proceedings.
In a statement, the group stated that it is "unviable financially to continue the business as it is currently structured in Germany". It further stated that "the after-effects of the coronavirus pandemic and the consequences of international conflicts" in addition to high rent, labor costs, and energy prices had impacted the European subsidiaries' finances.
As two of the currently affected German businesses are also shareholders in other Esprit Holdings companies in France, the UK, and Poland, among others, which may potentially be subject to a similar insolvency procedure in the future, the statement cautioned that more European businesses could be affected.
Reuters reports that in March, Esprit declared bankruptcy in both Belgium and Switzerland.
Are shops closing in Europe?
Up to now, no notification has been made regarding store closings.
Although the business will continue to operate until further notice, the insolvency will ultimately have a direct impact on the jobs of almost 1,500 people.
Each subsidiary's management is currently working on plans for reorganization, and the group is looking into new financial sources, as they have indicated: "Various potential investors have expressed their interest for strategic partnership."
A financial investor is reportedly in the advanced stages of negotiations to purchase the trademark rights across Europe, according to Reuters.
Euronews Business reached out to Esprit for comment, but they haven't heard back. /BGNES