Esprit Holdings Ltd. said it won’t change a strategy intended to boost the fashion brand’s revenue, even after both the chairman and chief executive officer resigned.
The stock, which plunged 32 percent over the last two days on news of the resignations, climbed 9.9 percent to HK$10.14 at the close of Hong Kong trading.
CEO Ronald Van der Vis said on a conference call that he’ll remain at his post for 12 more months as his resignation is purely for family reasons and not because of any dispute with the board. No strategic changes are planned to Esprit’s transformation program, though some “adjustments” are possible, Van der Vis said on the call yesterday.
“The stock will likely experience some more volatility in the near term,” said Mohan Singh, a Hong Kong based analyst at CITIC Securities International. “The abrupt resignation of two key people has created uncertainty and it may take some time for the company to reassure investors that everything is on track, especially given the current unstable economic environment.”
CLSA Asia-Pacific Markets upgraded Esprit to “buy” from “underperform” in a note dated June 14, citing the stock’s decline on the resignations. The analysts still cut their share price estimate to HK$11.60 from HK$13.90.
“Regardless of explanations, the departure of the CFO, CEO and chairman in a relatively short space of time provides investors with some degree of concern,” the analysts said.
The 44-year-old CEO has been trying to boost revenue from China and improve the Hong Kong-based retail chain’s clothing designs as Hennes & Mauritz AB and Inditex SA’s Zara lure customers away. In an investor presentation last year, the company said it planned to spend more than HK$18 billion ($2.4 billion) over four years on efforts to revive its brands through more marketing and a bigger Chinese presence.
Hans-Joachim Koerber resigned as chairman June 13, a day after the retailer said Van der Vis was stepping down. Their exits are the latest hurdle for the casual-clothing retailer, which in September reported a 98 percent plunge in fiscal-year profit and said its brand had “lost its soul.” Van der Vis said the reorganization’s execution is “on track.”
The stock plunged 73 percent last year.
Europe accounted for 78 percent of Esprit’s revenue in the six months ended December, according to data compiled by Bloomberg. Fiscal first-half profit dropped 74 percent.
The company hasn’t received acquisition proposals and isn’t holding takeover talks, Van der Vis said yesterday.
Vice Chairman Paul Cheng, 74, declined to step in as chairman because of his age, and his nomination of Raymond Or for the position was accepted unanimously by the board, Van der Vis said. The resignations of the CEO, who said he’s leaving because his family doesn’t want to relocate from the Netherlands, and the chairman aren’t connected, he said.
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 in May.
The CEO is leaving as the company has started showing some improvement in same-store sales. The retailer said in May that revenue at outlets open more than a year increased 0.5 percent in the three months ended March after dropping 4.6 percent in the six months to December 31.