Esprit names Inditex executive as CEO; shares rise
Updated: 2012-08-08 07:08
By Sophie He(HK Edition)
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Struggling fashion house Esprit Holdings Ltd appointed an executive from rival Inditex as its new chief executive on Tuesday, driving its shares 28 percent higher just two months after the double resignations of its chairman and CEO that wiped out nearly a third off its market value.
Shares of the blue chip firm soared 38 percent during intra-day trading before it closed at HK$12.76, up 28 percent, a nearly two-month high and its biggest one-day gain in 14 years, after the company said Jose Manuel Martnez Gutirrez will take over the helm.
Spain's Inditex is one of the world's largest fashion retailers which owns brands including Zara and Massimo Dutti. Martnez was Inditex's most recent group director of distribution and operations.
Martnez's appointment will be effective on or before the end of September 2012, according to Esprit. The news comes two months after Esprit chairman Hans Joachim Korber and chief executive Ronald van der Vis resigned in quick succession, mounting concerns about the management stability and whether Esprit's four-year transformation plan will becarried out.
Raymond Or Ching-fai, non-executive chairman of Esprit, said in a statement that Martnez was a key factor in delivering consistent positive growth for Inditex over several consecutive seasons.
"Mr Martnez has a track record of outstanding leadership that will be critical to executing Esprit's transformation plan," said Or.
Esprit's non-executive deputy chairman Paul Cheng Ming-fun said at its press conference in Hong Kong on Tuesday that the new CEO Martnez will join the company after mid-September and will be based in Germany.
Cheng stressed that the company's transformation plan will be open to fine-tuning but it will not undergo any major changes under the new CEO. He said that the company will continue to focus on its European operations and will aggressively develop businesses in Asia.
Citic Securities International analyst Mohan Singh said in his report that as Esprit has appointed Martnez as its new CEO, investor concerns surrounding the stock about the strategic leadership of the company will now be lifted.
"Mr Martnez appears to have the right mix in retail and investment banking/consulting background to provide the appropriate strategic direction to improve the Esprit brand and the company's profitability," said Singh.
He pointed out that Martnez, who was focused on improving Inditex's supply chain management, has also worked at McKinsey & Company for eight years, managing the firm's retail and consumer goods practice in Spain.
Citic Securities International has upgraded its rating for Esprit from "Sell" to "Buy", with a target price of HK$14.86.
Martnez said in a statement that he is honored and thrilled to join Esprit as the new CEO.
"I share the Board's vision...and am fully committed to delivering on the strategic, operation and financial objectives that will revitalize Esprit and its brand," said Martnez.
According to Esprit, Martnez will be paid 1.5 million euro per year, with annual discretionary bonus opportunity of 1.5 million euro of which the first two years' are guaranteed.
He is also entitled to a sign-on bonus of 1.25 million euro. A total of 5 million share options will be granted to him within six months from the commencement date of the employment.
sophiehe@chinadailyhk.com
(HK Edition 08/08/2012 page2)