After Esprit's chief executive, Ronald Van der Vis, and chairman Hans-Joachim Koerber both resigned over the course of two days this week, nervous investors sent its share price skidding 34 per cent, making the company the worst performer on the Hong Kong stock market.

It became the best performer yesterday when the shares rebounded 10 per cent to HK$10.14 each, following a management conference call with analysts on Thursday night aimed at reassuring investors that the company would stick to its overhaul strategy. The broader market rose 2.26 per cent.

'While the macro environment does add some headwind, we think that Esprit's brand is in a better state than the market appreciates, and they are making good progress on the transformation plan,' Gary Pinge, an analyst with Macquarie Capital Securities, said in a research note after the conference call.

The board has said it has no disagreement with either executive. And Van der Vis noted on the call that he was leaving for family reasons and that his contract required him to give 12 months' notice.

Over the past six years, the Hong Kong-German firm has had three different chairmen and two chief executives. In December, chief financial officer Chew Fook Aun also quit.

Esprit's vulnerability harks back to 2006 when Michael Ying Lee-yuen, the former controlling shareholder and husband of socialite and former actress Brigitte Lin Ching-hsia, stepped down as chairman. Ying remained a non-executive director until 2008, but sold most of his stake in stages between 2003 and 2010 for more than HK$20 billion.

A year after Ying cut his ties with Esprit, the company reported that its first-half profit fell for the first time in more than a decade, as sales were hit by the global financial crisis.

Jerry Peng, a retail analyst with Guotai Junan International, said the vacuum created by Ying's departure as controlling shareholder 'is the core problem for Esprit'.

Peng thinks there has been no real leader at the company for years. 'If you're the business owner, you would try your best to take care of it, just like your own baby. Otherwise, you would feel you always have a chance to 'jump the boat',' despite a handsome compensation package.

According to Esprit, US hedge fund Lone Pine Capital is its largest shareholder with a 12 per cent stake, followed by Marathon Asset Management, with 7 per cent. German non-executive director Jurgen Friedrich holds 3.5 per cent, while each of the other board members holds less than a 1 per cent stake.

Esprit was founded by Susie and Doug Tompkins in San Francisco in 1968. Three years later, the couple met Hong Kong businessman Ying, who played a key role in expanding the brand to Europe and Asia.

As the brand took off, sales topped US$100 million in 1978 and international partnerships in Hong Kong and Germany were formed.

Esprit's Asian distribution business was listed on the Hong Kong stock exchange in 1993 and it was ranked 28th out of the 100 most recognised brands in the United States, according to the company's website.

'How much faster can we grow?' Esprit once asked itself when it became a constituent stock of Morgan Stanley's MSCI Hong Kong Index in 2000.

To boost the business, then chairman Heinz Krogner-Kornalik appointed Van der Vis, former head of optical retailer Pearle Europe, as chief executive and hired new management in 2009.

Van der Vis identified the China market as a new growth engine. Esprit bought out the joint venture it had on the mainland with China Resources Enterprise for HK$3.88 billion in December 2009.

However, the new team was unable to turn the tables. The company recorded a slump in profit for three years in a row. It posted a 98 per cent plunge in net earnings to HK$79 million for the year to last June.

Along with the weak profit performance, the stock price also plunged from a record high of HK$133 each in October 2007 to just HK$7.55 in September last year. Esprit conceded that 'the brand has gradually lost its soul over the past few years' as well as its customer focus as it fought stiff competition from Inditex's Zara brand of Spain and Stockholm-based Hennes & Mauritz.

As part of the four-year makeover plan, Esprit hired Brazilian supermodel Gisele Bundchen to present its new collections, launched a fresh retail store concept, established design centres and set up a 'trend division' in Paris. There are plans to open a design hub in mainland China to step up its design capacity later this year. In the meantime, it closed loss-making outlets in North America.

The new initiatives have started to work in the first quarter of this year, with a slight improvement in the comparable store sales in Europe, and a narrowed turnover decline in wholesale business, the firm says.

But Esprit is still grappling with rising costs and soft demand in Europe, which accounts for nearly 80 per cent of its turnover. The performance of its China business also appears to be lagging other apparel brands on the mainland.

This week, the company appointed independent director Raymond Or Ching-fai, former banker with Hang Seng Bank, as chairman to replace Koerber, whose resignation was effective immediately.

Or told a Hong Kong radio station on Thursday that Esprit expected to find a new chief executive within three months to replace Van der Vis. Asked if he was worried about a takeover bid, Or said that while he was not thinking about that possibility, he would give any takeover proposals consideration.

'Apparently, Or is just a caretaker,' Credit Suisse researcher Gabriel Chan says. 'The key person would be the new chief executive.

'But the prescribed transformation plan introduced by Van der Vis nine months ago would make it more difficult to attract new talent likely to have different views.'

Still, he figures the chances of a takeover are slim. 'It would take about HK$2 billion to acquire a controlling [stake] in the company,' said Chan, who maintains a sell rating on the stock. 'I really doubt someone would do so, considering Esprit is not an attractive brand any more. With HK$2 billion, it's better to create a new brand.'