Listed Hong Kong clothing retailer Esprit suspended trading as stocks were plunging and with the resignation of its CEO late last week.
Despite a sweeping restructuring push to compensate for losses in North America and Europe by shifting operations to Asia, stocks fell to its lowest level since October 1997, down 22 per cent to HK$10.54 (US$1.35).
CEO Ronald Van der Vis and chairman Hans-Joachim Körber have both announced their resignations, according to a release from Esprit. Raymond Or Ching Fai will be the new chairman. CFO Chew Fook Aun quit six months ago and was replaced in March by Thomas Tang. The company release stresses Esprit will continue with its turnaround despite the departures.
Esprit was founded in San Francisco in 1968. It is a global lifestyle giant with outlets in 40 countries. With annual profits dropping 98 per cent in September last year, it now tries to regain earnings and a fading image by closing 80 stores and by investing more than US$2.32 billion over the next four years. Esprit’s market value has plunged since the onset of the global financial downturn, from US$20 billion to US$2.2 billion. It exited the US market early this year and has long been perceived as an Asian retail brand.
Most of its stores are in Europe, where it has announced the closure of its operations in Denmark, Sweden and Spain and consolidation in Germany, Austria, Switzerland, France, Belgium, the Netherlands and Luxembourg. Bloomberg data indicates that as at end of June 2011, 79 per cent of the company’s annual revenues came from its European operations. Germany accounts for about half of the sales in Europe.
The turnaround plan aims at expansion in Asian growth markets – China, first of all – but also Malaysia, Singapore and Taiwan. As Esprit tries to assert its position in the Asian market, it faces strong challenges from competitors H&M and Inditex.
Ronald Van der Vis, a 44 year old Dutchman, executive director and group CEO of Esprit Holdings, has been at the helm of Esprit since November 2009, after serving as CEO at Pearle Europe, a European optical chain, for five years. A release by Esprit at the Hong Kong Stock Exchange denies any outstanding issue between Van der Vis and the board or any need to call the attention of the stockholders.
Esprit’s statement quote personal reasons as a cause for the resignation: that Van der Vis needs to “devote more time to his personal endeavors.”
Principal trader at Piper Jaffray Asia Securities in Hong Kong, on the other hand, thinks that the reshuffle of leadership at Esprit will leave an imprint.
“The unexpected resignation of Van der Vis is a serious blow to the company’s transformation plan and will cast doubt on the execution. Investors may fear that his stepping down will bring the transformation efforts back to square one.”
GB
