Esprit Holdings

Esprit shares dive on report on its outlets

PUBLISHED : Thursday, 13 October, 2011, 12:00am
UPDATED : Thursday, 13 October, 2011, 12:00am


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Shares in clothing retailer Esprit Holdings could start to look threadbare in coming weeks if fund managers decided to switch into other less 'risky' stocks, an analyst warned yesterday.

The Europe-focused retailer suffered the biggest intraday drop yesterday in three weeks after a magazine report said it had overstated the number of stores it had on the mainland. At one point, Esprit shares fell 14 per cent to HK$9.51 a share, but recovered some lost ground, closing down 7.46 per cent at HK$10.18.

The article by Next Magazine, which reported that up to 92 of Esprit's 313 mainland outlets either did not exist or could not be reached by telephone, dealt a heavy blow to the company, which was still recovering from a dismal earnings result that has caused the shares to dive by as much as 50 per cent since mid-September.

In a statement to the Hong Kong stock exchange yesterday, Esprit said the article could have been based on outdated information on the company's website, as it was updated occasionally.

The company was not in any talks regarding intended acquisitions. Chew Fook-aun, Esprit's chief financial officer, said the company had no plans to introduce any financial and strategic partners.

Alex Wong, asset management director at Ample Capital Group, said Esprit became an attractive buyout target when its market value fell below US$1 billion.

'Its brand is not broken. Its present share price is indeed quite attractive. However, the report by the magazine is bound to scare short-term investors away. I had considered buying it myself, but now it has become a bit too risky,' Wong said.

Today would be critical for the firm's share price in the short term as major fund managers were expected to express their views on Esprit's outlook, Wong said.

Most of the 17 investment firms tracking the stock had either 'neutral' or 'positive' views when the firm's management announced HK$18 billion in investments to rebuild the brand.

The firm's net profit fell 98 per cent to HK$79 million in the year to June, because of a steep rise in expenses, unprofitable operations in North America, and store closures in Europe and Asia-Pacific.

Esprit's market value stood at HK$13.14 billion at the close of trading yesterday.

The firm, founded about 40 years ago by several businessmen, including billionaire Michael Ying Lee-yuen, was a one-time star in the retail sector. Its share price surged to HK$129.79 in 2007, from less than HK$4 when it listed in Hong Kong in December 1993.