HONG KONG—Esprit Holdings Ltd.  Chief Executive Ronald van der Vis sought to fend off speculation that the fashion retailer is facing a crisis following news this week that he and Chairman Hans-Joachim Körber resigned.

On a Thursday conference call with reporters, Mr. van der Vis stressed that he and Mr. Körber resigned purely for personal reasons. The CEO said he would remain in his position for another year and that, while he is passionate about his role, the requisite 150 days of travel a year had become too much of a burden on his family.

Esprit is scrambling after both its chairman and its CEO resigned. The WSJ's Deborah Kan speaks with Dow Jones' Jeffrey Ng to find out what's behind Esprit's fall.


"Esprit is my life," he said, "but there is no other way."

Mr. van der Vis said the twin resignations within two days had nothing to do with each other. Mr. Körber couldn't be reached for comment.

Esprit's shares dropped 12% as the resignations cast a shadow on the struggling company's turnaround plan, which kicked into full gear less than a year ago. Shares of the company, which has lost one-third of its market capitalization over the past two days, closed Thursday at 9.23 Hong Kong dollars (US$1.19), far below the HK$130 high they reached in 2007.

Speculation over the future of a company that once was one of Hong Kong's most lucrative investments was compounded by the fact that the company didn't elaborate on its brief statements to the stock exchange until the conference call late Thursday. Analysts said they were surprised that the company left the public in the dark for more than a day, and some speculated that Esprit could become a takeover target.

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Ronald Van der Vis, who resigned as chief executive of Esprit Holdings


Hong Kong shareholder activist David Webb said the developments could suggest that there have been strategic differences on the company's plans.
Earlier
Heard on the Street: Esprit's Lost Spirit
Top Two Leaders at Esprit Resign


Mr. van der Vis said the company wasn't engaged in takeover talks and that the board had reiterated its support for the plan he had devised to revive the company. He said he was sorry if people believed that the company hadn't been transparent about the management changes. "I had not anticipated such a radical reaction," he said.

CLSA analyst Aaron Fischer upgraded the stock to "buy" from "underperform" following Mr. van der Vis's clarifications, though the analyst said he still believed that risk for the company remains "very high," given the fierce competition in the global mass-market apparel business.

Esprit is the "bluest of blue chips" in Hong Kong, a senior executive said during the company's heyday years ago. But analysts more recently have speculated that the company would be removed from the blue chip Hang Seng Index because of how much market value the company has lost.

The European debt crisis has hit the company hard, as the region accounts for 80% of Esprit sales. The company also has struggled to fend off stiff competition from Sweden's Hennes & Mauritz AB  and Spain's Inditex SA,  which owns the Zara fast-fashion chain.

"Esprit's products are stuck in the middle," Kim Eng Securities wrote in a note. The company doesn't bring fashion trends to the market as quickly as H&M and Zara, and its products are usually priced higher, the firm said.

In September, after reporting a 98% decline in profit for the fiscal year through June, the company declared that it had "lost its soul." Esprit said it would 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.

Esprit in February reported weak-yet-improved results, a 74% drop in first-half profit, and said its four-year "transformation journey" was well under way. Mr. van der Vis, standing in front of an ad from the company's new campaign featuring Brazilian supermodel Gisele Bündchen, said Esprit was "going back to its heritage" by having "real people" in its ads.

The brand was born in 1968 when Susie and Doug Tompkins started selling clothing out of the back of their station wagon in San Francisco. The company was sold in 1989 to its chief sourcing agent, Michael Ying of Hong Kong, when Esprit's U.S. sales were flagging. The company listed on the Hong Kong Stock Exchange in 1993.

Mr. Ying has pared his holdings in recent years, selling off large chunks from 2003 through February 2010. He made US$2.81 billion from the transactions, or nearly double Esprit's current market cap of US$1.54 billion. Hedge fund Lone Pine Capital LLC now holds the largest stake in Esprit, with a 12% holding.

Esprit's restructuring has been complicated by a management exodus. With this week's announcements, four top executives have resigned, all citing personal reasons. Chief Financial Officer Chew Fook Aun left on June 1. The company's previous chairman, Heinz Jürgen Krogner-Kornalik, resigned in February of last year.

Raymond Or, recently chairman at China Strategic Holdings Ltd.,  a battery maker and investment company, succeeded Mr. Körber as chairman. Mr. Or in an interview expressed confidence in the fashion retailer's outlook and finances. He said Mr. Körber's resignation was unlikely to have a significant impact on the company's operations because the chairman role is nonexecutive.

Write to  Kate O'Keeffe at kathryn.o'keeffe@dowjones.com and Fiona Law at fiona.law@dowjones.com
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