Bloomberg News

Esprit Shares Rise After Hedge Fund Increases Stake

October 11, 2011

(Updates with closing share price in second paragraph.)

Oct. 11 (Bloomberg) -- Esprit Holdings Ltd., the largest Hong Kong-listed clothing retailer, rose to a three-week high in trading in the city after hedge fund Lone Pine Capital LLC increased its stake to become the second-biggest shareholder.

Esprit climbed 12 percent to HK$11 at the 4 p.m. close in Hong Kong trading, the stock’s highest level since Sept. 16. Lone Pine Capital bought 38.9 million shares at an average price of HK$9.50 each on Oct. 4, a disclosure filing to the Hong Kong stock exchange showed.

The purchase by the Greenwich, Connecticut-based hedge fund helped trim a decline by Esprit since the apparel company said Sept. 15 full-year profit fell 98 percent. Revenue from Europe, where Esprit makes most of its sales, declined for a third year amid the region’s debt crisis and intensified competition.

“The stake increase by the hedge fund is certainly a factor driving the share price,” Kenny Tang, an analyst at AMTD Financial Planning Ltd., said by phone today. “It may spur the idea that further purchases could be on the way.”

Lone Pine Capital’s stake in the retailer increased to 6.23 percent from 3.22 percent after the transaction, according to the filing. The fund’s holding trails that of State Street Corp., which owns 6.41 percent, Bloomberg data shows.

‘Lost Its Soul’

Esprit has slumped 40 percent from its Sept. 14 closing price, compared with a 4.8 percent decline in the city’s benchmark Hang Seng Index. Net income for the year ended June was also eroded by costs to close stores and sell Esprit’s North American operations, the company said on Sept. 15.

European rivals Hennes & Mauritz AB and Inditex SA’s Zara have lured away customers from Esprit since the Hong Kong-listed company posted record net income for the year ended June 2008, prompting Chief Executive Officer Ronald Van der Vis to say last month that the Esprit brand had “lost its soul.”

To turn the company around, Van der Vis plans to more than double sales in China, the world’s most populous nation, in four years. In the year ended June, it had HK$2.68 billion in revenue from China, Esprit’s fastest-growing market.

Esprit also intends to spend HK$6.8 billion on branding over the next four years, focusing its efforts on China and parts of Europe, according to a company presentation. Almost one-third of its marketing will be directed to China.

Esprit’s brand is valued at $3.4 billion, equal to Polo Ralph Lauren Corp.’s Ralph Lauren, according to a report released in May by Millward Brown Optimor, a unit of WPP, the world’s largest advertising company. By comparison, the company’s market capitalization is about $1.8 billion.

--Editors: Terje Langeland, Dave McCombs

To contact the reporter on this story: Billy Chan in Hong Kong at

To contact the editor responsible for this story: Stanley James at

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