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Published
Oct 22, 2012
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Esprit taps shareholders for restructuring funds

By
Reuters
Published
Oct 22, 2012

HONG KONG - Fashion retailer Esprit Holdings Ltd is tapping shareholders for up to $677 million to help finance a long-planned multi-billion dollar restructuring.


Photo: AFP

Selling everything from bed sheets to jeans, Esprit has been trying to restructure its retail business as sales slow, especially in Europe where it generates three-quarters of its sales.

Esprit - which earlier this year hired a new chief executive from rival Inditex SA, parent of fashion chain Zara - last week posted lower-than-expected second-half earnings t h at sent its shares down as much as 8 percent on the day.

The company, which competes with the likes of U.S. group GAP Inc and Japan's Fast Retailing Co Ltd, is proposing a one-for-two rights issue of new shares to existing investors. It had said last year it would invest more than $2.3 billion in the restructuring.

Esprit said the issue would give it financial flexibility to rebuild its brand, overhaul its product range, refurbish stores, develop its supply chain, pay for expansion and for general working capital.

The new stock will be priced at HK$8 per share, a discount of about 36 percent to Monday's close, Hong Kong-listed Esprit said in a stock exchange filing. The issue will be the first from the company in 15 years.

"The initiatives we are addressing and the type of transformation plan we are addressing ... is going to take time," newly appointed CEO Jose Martinez said. "Most of the changes we are introducing into the company are challenging and demand a lot of resources."

The company also reported sales of $850 million for the three months through September, down 22.8 percent. Excluding store closure programmes and North America, turnover declined 19.7 percent.

However, sales from stores open more than a year fell only 0.2 percent, against a fall of 8.5 percent a year ago, helped by a better performance in Europe.

Martinez warned of uncertainties around the performance of the company and the market. "I don't know where the bottom is," he said. "I would say we have to be ready for a slow turnaround of the company."

($1 = 7.7502 Hong Kong dollars)

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