HONG KONG/MILAN (Reuters) - The outgoing chief executive of Esprit Holdings (0330.HK) 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 personal reasons.
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 (HMb.ST) and Spain’s clothing giant Inditex SA (ITX.MC).
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”.
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 (0011.HK) 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 .HSI.
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 .HSI.
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 (0083.HK).
In May, Esprit posted an improvement in quarterly store sales and booked a write-back from divesting its North American retail operations.
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 (9983.T), 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 Loades-Carter