--Esprit's shares surge to their biggest daily percentage gain
in 14 years after announcement of new CEO
--New CEO will receive EUR1.5 million (US$1.9 million) a year
with an annual bonus of as much as EUR1.5 million
--Fashion retailer's chief will be based in Ratingen,
Germany
HONG KONG--Shares of Esprit Holdings Ltd.'s (0330.HK) shares
jumped by their biggest daily percentage gain for 14 years Tuesday
as investors welcomed the fashion retailer's announcement it has
appointed a senior executive from Zara parent Inditex SA as its new
chief executive. The move resolves a major uncertainty weighing on
the blue-chip company.
Esprit's Hong Kong-listed shares were up 28% at 12.76 Hong Kong
dollars Tuesday, down slightly from an earlier high of HK$13.80. It
was the biggest daily percentage gain since a 46% rise on Jan. 21,
1998. The blue-chip Hang Seng Index was 0.4% higher Tuesday.
Analysts said the appointment of Jose Manuel Martinez Gutierrez
as chief executive removes a major overhang on the stock in the
wake of the unexpected resignations of the company's chairman and
chief executive in June.
Shares of Esprit--once described by an executive of the company
as "the bluest of blue chips" and changing hands for as much as
HK$130 in 2007--fell below HK$10.0 from more than HK$13.00 after
the resignations. The departures came six months after the
company's chief financial officer quit fueling worries about
management stability and the outlook for a turnaround plan that
kicked into full gear less than a year ago.
Mr. Martinez, 42, was group director of distribution and
operations at Inditex, the world's largest fashion retailer by
sales and owner of the fast-fashion chain Zara. The appointment
will take effect at the end of September or earlier, Esprit said
Tuesday.
"Mr. Martinez has a track record of outstanding leadership that
will be critical to executing Esprit's transformation plan,"
Esprit's chairman Raymond Or said in a statement.
Mr. Martinez, the third Esprit's CEO in five years, will be
based in Ratingen, Germany. His salary will be 1.5 million euros
(US$1.9 million) a year, with an annual bonus of as much as EUR1.5
million guaranteed for the first two years. His signing bonus is
EUR1.25 million and he gets 5 million share options.
CLSA analyst Mariana Kou said the appointment is a positive
development for Esprit given Mr. Martinez's strong retail
background, but the question now is whether he will be able to help
the company transform itself given the many challenges it is
facing.
Mr. Martinez's background is operational rather than marketing
and branding, Macquarie research analyst Gary Pinge said,
suggesting that significant changes are unlikely. "The focus is to
be execution of the existing transformation plan," Mr. Pinge
added.
Esprit's deputy chairman Paul Cheng told reporters Tuesday the
transformation plan may be fine tuned when Mr. Martinez takes
charge but he doesn't expect big changes.
Esprit remains committed to Europe despite the debt crisis there
weighing on demand, Mr Cheng added.
The company has struggled to fend off competition from Inditex,
and Sweden's Hennessey & Mauritian ABC which sells its products
under the H&M brand.
Last September, after reporting a 98% decline in profit for the
fiscal year through June, Esprit declared it had "lost its soul"
and announced plans to exit its North America business, close
retail operations in three European countries and invest more than
US$2.32 billion over the next four years to rebuild its brand.
In February, the company reported weak, yet improved results--a
74% drop in first-half profit. It said its four-year
"transformation journey" is well under way.
Write to Chester Yung at chester.yung@dowjones.com
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