New blow as chairman follows CEO in exiting Esprit
THE chairman of Esprit Holdings resigned yesterday, dealing a second blow to the clothing retailer a day after its CEO stepped down in a move that wiped out nearly a quarter of its share price.
The resignations have cast a cloud over the Europe-focused firm’s HK$18bn ($2,3bn) restructuring plan and put it on the radar of private equity buyers.
“As they both resigned almost at the same time, the impact will be huge. Investors are likely to lose confidence in the company,” said Linus Yip, chief strategist at First Shanghai Securities.
He said that further pressure was expected on the stock of a company which admitted last year that it had “lost its soul”.
The fashion group, which generates about 80% of its sales in Europe, has been trying to restructure its business as it grapples with a slump in demand due to the euro-zone debt crisis, but the resignation of group CE Ronald van der Vis late on Tuesday dealt a significant blow.
This was followed by an announcement yesterday that Hans-Joachim Koerber had resigned as chairman and would be replaced by Raymond Or Ching Fai, a move that added further confusion to Esprit’s outlook.
“With the weakness in the stock price and the CEO’s resignation, it escalates the possibility that the company could become a merger and acquisition target,” said UOB Kay Hian analyst Tommy Ho.
Banking sources said some private equity groups had previously looked at Esprit, which competes with Sweden’s Hennes & Mauritz and Spain’s Inditex, and that the share price plunge would likely attract renewed interest.
Esprit, which said Mr van der Vis had resigned for personal and family reasons, did not announce a replacement for the executive, who would have played a key role in the company’s restructuring plan due to be completed by 2015. The company said Mr van der Vis would step down by July 1 next year, and that it would continue to execute its restructuring as planned.
The latest resignations come after chief financial officer Chew Fook Aun left for personal reasons in December and was replaced in April by Thomas Tang, a former chief financial officer of Hong Kong-based blue-chip property developer SinoLand, a member of the Sino Group, owned by Singapore’s Ng Teng Fong family.
Shares of Esprit, which sells everything from bed sheets to jeans, plunged as much as 23% to HK$10,36 yesterday, to their lowest level since January 9. It was the biggest drop since October 1997.
The stock closed down 21,8% before it was suspended, against a 0,34% gain in the benchmark Hang Seng index. Trading is due to resume today.
The company’s market value is now $2,24bn, ranking it as Asia’s number six apparel retailer, down from third place last year, and compared with a market value of about $8bn at the end of 2010.
Esprit’s shares, which fell 73% last year, are up 42,7% from their lows in September. The stock has risen about 6% this year, beating a 2,7% gain in the main index.
“Its global presence could make it appealing to potential buyers,” said Alex Wong, a director at Ample Finance Group.
In May, Esprit posted an improvement in quarterly store sales and booked a write-back from divesting its North American retail operations.
The company said last year it was investing more than HK$18bn up to 2015 as part of a restructuring plan that includes an investment of HK$1,7bn a year till then to promote its brand.
The company, which also competes in Asia with Japan’s Fast Retailing, had 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$6bn ($773,23m) over the next four years and expand its point-ofsales network to 1 900 from 1 000. Reuters