Fashion Retailer Esprit Gains 150% Amid Potential Private Equity Investment

Hong Kong-based Esprit Holdings, the once high-flying fashion retailer with a global presence, saw its shares skyrocket 150% over the past two days as the company said it is in talks with an undisclosed international private equity firm to help turn around its struggling businesses in Europe.

In a filing to the Hong Kong stock exchange on Wednesday, Esprit announced that the private equity firm had expressed interest in submitting a non-binding offer of a potential partnership. The prospective deal involves the private equity firm taking control of Esprit’s European businesses and assisting their restructuring and turnaround, the apparel retailer said. The firm was also interested in investing in Esprit, it added.

The announcement comes two days after Esprit said its Belgium subsidiary had filed for insolvency proceedings at the local court of the European country. The fashion house blamed high energy and logistics costs, negative consumer sentiment and expensive rents for the insolvency of its Belgium unit, adding that its closure was “unavoidable.” Its Swiss subsidiary in March also filed for insolvency.

Esprit, once a Hong Kong blue-chip company that sells clothing seen as trendy in the 1990s, has been trying to make a comeback but so far grappled with mounting losses. In its earnings report, Esprit said its net loss in 2023 widened to HK$2.3 billion ($290 million) from HK$882 million a year earlier. The company’s revenue, with more than 60% derived from its European retail and wholesales business, also dropped 16% year-on-year to HK$5.9 billion.

Founded in 1968 in San Francisco, Esprit started to take off after Hong Kong businessman Michael Ying, who was its chief sourcing agent, bought the company from cofounders Susie and Doug Tompkins in 1989. Under the leadership of Ying, Esprit had grown from a little-known brand to a global fashion house with presence in Europe, America and Asia. The company went public on the Hong Kong stock exchange in 1993 and saw its market cap peak at HK$161 billion in 2007. The success of Esprit catapulted Ying to billionaire status in 2004.

The global financial crisis in 2008 took a toll on Esprit’s business, and the company has since then struggled to reclaim success with increasingly intense competition from fast-fashion brands like Zara and H&M. Ying sold most of his stake in Esprit after stepping down as chairman in 2006. He remains one of Hong Kong’s wealthiest people, with a net worth Forbes estimated at $2.2 billion.

Over the past decade, Esprit was forced to exit markets in North America, Australia, Asia and part of Europe. Today, its stock price is down 99.7% from its peak of HK$111.8 in 2007. The company is now led by CEO William Pak and his wife Christin Chiu, who serves as chairwoman. Both Pak and Chiu are trained lawyers. Esprit’s current shareholders include Karen Lo of the Lo family that runs Vitasoy International, one of Hong Kong’s major manufacturers of plant-based food and beverages.