("2nd Update: Esprit Chairman Korber Leaves, Just Day After CEO Announces Departure," at 1314 GMT, misstated the time of the CFO's departure in the fifth paragraph. The correct version follows:)
-- Esprit Chairman Korber leaves, with immediate effect
-- Esprit Shares plunge over 20%, following CEO's abrupt resignation Tuesday
-- Raymond Or is named to replace Mr. Korber, but no replacement has been named for Mr. van der Vis
By Fiona Law and Yvonne Lee
HONG KONG--Esprit Holdings (0330.HK), the fashion retailer that's less than a year into revitalizing its brand and turning around its fortunes, said Wednesday that its chairman had resigned, just a day after its chief executive suddenly quit.
Chairman Hans-Joachim Körber resigned "due to personal reasons" from Esprit, a retailer known for its casualwear, while Chief Executive Ronald van der Vis departed for "personal and family reasons". Shares in the designer and retailer fell 22% Wednesday, wiping US$490 million from its market capitalization, before they were suspended from trade in the early afternoon. Replacing Korber will be Raymond Or, a former chief executive at Hang Seng Bank, HSBC Holdings PLC's Hong Kong unit, and until recently, chairman at Hong Kong-listed China Strategic Holdings Ltd. (0235.HK), a battery maker and investment company.
Once a household name with a market capitalization of more than US$20 billion just before the financial crisis, Esprit has in recent years suffered from competition against rivals such as Spain's Inditex SA, the owner of fast-fashion pioneer Zara, and Hennes & Mauritz AB that are known for edgier clothing and trendier brands. Esprit, founded in San Francisco in 1968 by then husband and wife, Doug Tompkins and Susie Tompkins, was partly sold to its chief sourcing agent, Hong Kong-based Michael Ying, in 1989, a time when its U.S. sales were flagging, and the couple's differences intractable. Ying has exited the Hong Kong blue-chip company in recent years, and the biggest stake is now in the hands of hedge fund Lone Pine Capital LLC, which owns 12%.
With Europe now accounting for a bulk of its sales--a whopping 80%-- and Germany alone making up almost half, the eurozone downturn has hit the company especially hard. Esprit posted a 74% drop in net profit in the six months to December, and its market cap now stands at around US$2.2 billion, a fraction of its value five years ago.
The departure of both Korber, and Van der Vis, to pursue "personal endeavours", comes just after Chief Financial Officer Chew Fook Aun left on June 1.
Analysts said that the departures had raised concerns that more problems may be afoot at the retailer, and were keen for clarification. "The CEO and chairman leaving ... could indicate larger issues than if it's just the CEO leaving for family reasons," said Aaron Fischer, an analyst at CLSA.
Korber's resignation takes effect immediately, Esprit said, while Van der Vis' starts around July.
With the management leaving, analysts also said they weren't confident that Esprit would have the resources or capability to transform its brand.
The fashion retailer said early this year it is pressing ahead with efforts to revive its brand after declaring last year it had "lost its soul", after announcing its dramatic profit slump in September and plans to sell its North America business and exit retail operations in three major European countries. It also said it would invest more than US$2.32 billion over the next four years to rebuild its brand.
"The key question lies in the replacement and the future of Esprit's transformation plan. We still expect Esprit's topline growth to disappoint," Goldman Sachs said in a research note after Mr Van der Vis quit.
Mr. Korber, Mr. van der Vis and Esprit couldn't immediately be reached for comment. Raymond Or declined to comment.
Bank of America Merrill Lynch Wednesday cut its 12-month target price on the stock to HK$12.50 from HK$14.00 due to slow progress at store remodeling and rising uncertainty over consistent execution of the company's expansion plan. The firm said Mr. van der Vis was the key person driving the group's four-year transformation plan, starting from September 2011, and has rebuilt the management team over the past 18 months.
In May, Esprit reported its revenue for nine months ended March 31 fell 7.2% from a year earlier to HK$24 billion, weighed by continued weakness in its wholesale business and European sales. Esprit's management departures came as Zara owner Inditex Wednesday posted a 30% jump in its first-quarter net profit, and a strong start to its second quarter, confounding an economic slowdown in its home market.
Write to Fiona Law at [email protected] and Yvonne Lee at [email protected]