Esprit Holdings Ltd. (330) reported the resignation of its chairman a day after Chief Executive Officer Ronald Van der Vis quit, jeopardizing the apparel retailer’s turnaround plans.
Esprit stock slumped 22 percent to HK$10.54, its biggest drop since October 1997, before trading in the shares was suspended in Hong Kong. Hans-Joachim Koerber resigned as chairman and Raymond Or Ching Fai takes over effective today, Esprit said after the market closed today, after announcing yesterday Van der Vis is leaving.
The departures are the latest hurdle for the company that in September reported a 98 percent decline in fiscal year profit and said its brand had “lost its soul.” Van der Vis, a 44- year-old Dutchman, had been trying to boost China revenue and improve designs as Hennes & Mauritz AB (HMB) and Inditex SA (ITX)’s Zara lure customers away.
“The unexpected resignation” of Van der Vis “is a serious blow to the company’s transformation plan and will cast doubt on the execution,” said Andrew Sullivan, principal trader at Piper Jaffray Asia Securities Ltd. in Hong Kong. “Investors may fear that his stepping down will bring the transformation efforts back to square one.”
Van der Vis is leaving as the company started showing some improvement in same-store sales. The retailer in May said revenue at outlets open more than a year grew 0.5 percent in the three months ended March after dropping 4.6 percent in the six months to December 31.
The resignation will be effective on or before July 1, 2013, in accordance with his service contract, Esprit said in the statement.
“I am very shocked at his departure at this point in time,” said Gabriel Chan, a Hong Kong-based analyst at Credit Suisse Group AG. “The transformation plan is going quite well, at least they had a good start with improvement in sales growth.”
Van der Vis, who joined the company in 2009, announced his departure a little more than six months after the resignation in December of Chief Financial Officer Chew Fook Aun. Thomas Tang, previously CFO at Sino Land Co., succeeded Chew last month. The company will continue to execute transformation efforts as planned, it said in yesterday’s statement.
Esprit plunged 73 percent in Hong Kong trading last year and reported a 74 percent drop in first-half profit in February. The company got 79 percent of revenue from Europe in the 12 months ended June 2011, according to data compiled by Bloomberg.
“We still expect Esprit’s topline growth to disappoint,” Joshua Lu, an analyst at Goldman Sachs Group Inc., wrote in a note dated June 13.
“The board regrets this, but respects Mr. Van der Vis’s decision to devote more time to his personal endeavors,” Esprit said. “He has no disagreement with the board and there is no matter that needs to be brought to the attention of the shareholders.”
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