The clothes’ new emperor-.docVIP

The clothes? new emperor? Calling Esprit?s year-to-date stock performance a rollercoaster doesn?t do it justice. As the year opened, investors were confident that the casual clothing company?s turnaround plan to revamp its brand, streamline operations and reorient the company toward Asia would restore falling profitability. Esprit?s stock peaked on March 2, up more than 90% year-to-date. But the company?s fortunes turned bad, then worse. The share price gradually declined for the next three months, and then the company dropped a bombshell in the form of surprise management changes. On June 12, CEO Ronald Van der Vis announced plans to resign. A day later, Chairman HansJaochin Korber stepped down in what appeared to be an uncoordinated move. The stock plunged 32% in two days, despite suspended trading on the Hong Kong Stock Exchange. With so much uncertainty about the company?s future, analysts rushed to downgrade the Esprit stock. The turnaround plan was already ambitious. But without clear leadership, the company?s ability to execute that plan is even more questionable. With most analysts already predicting that Esprit will not report its first positive earnings growth until 2013 or later, only the most patient investors are likely to wait out the risky transition. “We are very positive on the brand,”said Vineet Sharma, a Hong Kong-based analyst for Barclays. “We definitely think the brand has a future and has enormous value, but obviously you need A) a top class management to unlock that value and B) a better thought-out turnaround plan.” The cost of the turnaround plan has weighed on Esprit?s profits since it was first announced in 2011. The four-year US$2.32 billion plan included hiring model Gisele Bundchen as the face of the brand, designing new products, revamping stores and opening new ones. Although these steps are likely to benefit the company in the long-term, the costs, combined with a weak European economy, contributed to a 74% decline in