(Updates with closing share price in second paragraph.)
Oct. 17 (Bloomberg) -- Esprit Holdings Ltd., the largest Hong Kong-listed clothing retailer, surged to the highest in a month after a newspaper reported the company plans to improve product quality and get rid of its U.S. business.
Esprit rose 7.9 percent to close at HK$12.52, the highest level since Sept. 15, as of the 4 p.m. close on the Hong Kong stock exchange. The benchmark Hang Seng Index climbed 2 percent.
The clothier is targeting a turnaround after its brand image and quality relative to price suffered as the company focused too much on the interests of short-term investors, Chief Executive Officer Ronald Van der Vis said, according to an interview in Handelsblatt newspaper Oct. 15. The company plans to improve the quality of its products and produce more fashionable collections, he said, according to the report.
Esprit’s gains today may be from traders buying back shares they had borrowed and sold in a bet on decline, said Steven Leung, director of institutional sales in UOB-Kay Hian Holdings Ltd. in Hong Kong. “It’s probably some short covering, as the share price kept on rising recently. Fundamental investors wouldn’t buy at this level.”
Short sales of Esprit surged to 17.9 million shares on Oct. 12, more than 30 times higher than the same day a year earlier, according to Bloomberg data.
A phone message left at Esprit’s investor relations office today was not returned.
Esprit has hired an investment bank to sell the company’s unwanted U.S. business and will close stores in the U.S. if it fails to find a buyer, the report cited Van der Vis as saying.
--With assistance from Billy Chan in Hong Kong. Editor: Dave McCombs
To contact the reporter on this story: Marco Lui in Hong Kong at firstname.lastname@example.org
To contact the editor responsible for this story: Dave McCombs at email@example.com