Shares of fashion retailer Esprit (0330) plunged yesterday over investor concern about the incoming chief executive's ability to lead the firm amid plummeting global demand.
Esprit shares were down by as much as 7.7 percent at one stage following confirmation that chief executive Heinz Krogner will be succeeded by Ronald Van der Vis by November.
Van der Vis is now chief executive of Europe Pearl, a 2,600-outlet optical chain with which he has more than 10 years of senior managerial experience.
"[Esprit's] share price is expected to be under continuous pressure due to the management transition and the gloomy operating environment," said CIMB- GK Securities analyst Renee Tai.
"The seasonal nature of the apparel business makes inventory management a vital factor, which is very different from running an optical chain." Esprit should continue its efforts on brand building and positioning, Tai added.
The management reshuffle has risks as Krogner's experience in apparel quality "cannot be learned in a short period," Goldman Sachs analyst Joshua Lu wrote in a note. "In our view, one of the key strengths of Esprit with Krogner at the helm has been the focus on quality.
"We see no reason to change our cautious view on the stock."
Lu added that the firm's core pricing and margin structure may face stiff challenges because of keen competition in the European market, which accounts for 85 percent of Esprit's sales.
Goldman Sachs' 12-month target price of Esprit is HK$35. Esprit ended trading yesterday 5.9 percent lower at HK$41.35.
