* Key executive resignations cast doubt over turnaround plan
* Shares extend slide after 22 percent plunge on Wednesday
* CEO says restructuring to go ahead as planned
* CEO says his family only reason for his resignation
(Recasts after conference call, adds details)
By Donny Kwok and Antonella Ciancio
HONG KONG/MILAN, June 14 The outgoing chief
executive of Esprit Holdings sought to reassure
investors on Thursday that his family was the only reason behind
his point-blank resignation from the retailer and that a crucial
turnaround plan would go ahead as planned.
News of resignations within two days of the CEO and Chairman
of the Hong Kong-listed fashion retailer sparked a sell-off that
wiped about a third off the company's market value and stoked
speculation the company could become a takeover target.
Chief Executive Officer Ronald van de Vis said in an evening
conference call that the timing of the double resignation had
been "unfortunate" but his case was unrelated to that of
Chairman Hans Joachim Korber, who quit on Wednesday.
"I have to be realistic. On those circumstances I cannot
continue the way I have been working. I have been neglecting my
family situation too much," de Vis said firmly after announcing
on Tuesday that he would leave the company on July 1, 2013.
Korber said he also had resigned with immediate effect for
The management reshuffle has cast uncertainty over the
company's ability to execute a costly turnaround plan and revive
a Europe-focused brand that competes with bigger Swedish
retailer Hennes & Mauritz AB and Spain's clothing giant
The stock has lost around 34 percent in two days as the
departures raised worries about management stability.
"Resignations of the top two executives are not a good sign.
The stock is set to face pressure in the immediate run as
investors lose faith in the company," said Francis Lun, managing
director at investment firm Lyncean Holdings.
"As the stock falls, it could easily become an acquisition
target by rivals or private equity funds," Lun said.
Banking sources have told Reuters some private equity groups
had previously looked at Esprit, and the stock plunge would
likely attract renewed interest.
"I want to be crystal clear. There is no discussion ongoing
with anybody, and no proposal whatsoever has been received," van
de Vis said.
Asked about his decision to remain at the company for
another year, the top retail manager said he wanted to ensure a
"smooth transition" with his successor.
Van de Vis said the new management would remain committed to
the plan agreed by the board and dismissed concerns about the
future of a company that said last year it had "lost its soul".
THE BLUEST CHIP
Known for its stencil-effect logo, Esprit generates about
80 percent of its sales in Europe, where domestic consumption
has fallen due to the euro zone debt crisis.
The retailer has launched an HK$18 billion ($2.3 billion)
restructuring plan due to be completed by 2015, which includes
an expansion in fast-growing China.
The CEO said he could not comment on Korber's decision but
reiterated his resignation did not depend on management issues.
He defended the appointment of former banker Raymond Or
Ching Fai as successor to Korber as chairman, saying his
experience of China would be an advantage for the company.
Or Ching Fai was a respected head of Hong Kong's Hang Seng
Bank before becoming non-executive director of Esprit.
Shares in the company once known as "the bluest of blue
chips in Hong Kong" fell as much as 14 percent to HK$9.03 on
Thursday, their lowest level since November, before closing down
12.4 percent at HK$9.23. That compared with a 1.15 percent drop
in the benchmark Hang Seng Index.
Citing outlook uncertainty, Standard Chartered downgraded
Esprit to underperform and cut its price target by 50 percent to
HK$8.70 from HK$17.50. Credit Suisse cut Esprit's target price
to HK$8.75 from HK$12.50.
Esprit's shares however are still up 22.3 percent from their
September 2011 lows. The stock, which fell 73 percent in 2011,
has shed 7.9 percent so far this year, lagging a 2.03 percent
gain in the main index.
Created in 1968 when American environmentalist Doug Tompkins
and his then-wife Susie sold clothes out of the back of their
station wagon in San Francisco, the company has currently a
market value of $1.75 billion, compared with around $8 billion
at the end of 2010.
The latest resignations come after CFO Chew Fook Aun quit
for personal reasons in December and was replaced in April by
Thomas Tang, a former chief financial officer of blue-chip
property developer Sino Land Co Ltd.
In May, Esprit posted an improvement in quarterly store
sales and booked a write-back from divesting its North American
Esprit said last year it was investing more than HK$18
billion up to 2015 as part of a restructuring plan that includes
an investment of HK$1.7 billion a year up to that period 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 sale in China by June 2015.
It said in September that it wanted to double China sales to
HK$6 billion ($773.23 million) over the next four years and
expand its point-of-sales network to 1,900 from 1,000.
(Reporting By Donny Kwok; additional reporting by Antonella
Ciancio in Milan; Editing by Richard Pullin and Jon