Esprit shares rocket after posting 74% net profit fall

Esprit Holdings Ltd posted a 74 percent fall in first-half net profit. However, results were better than expected, what lifted the retailer’s shares to a record price for the past 4 months. "Going to the second half of the financial year, we will continue

the rigorous and systematic implementation of our Transformation Plan in a continued challenging business environment," Esprit said in a filing to the Hong Kong bourse.

The company said its plans to re-establish Esprit as a leading fashion brand and restore long-term profitability were on track, despite the continued difficult economic climate.

Esprit rose as much as 12 percent to HK$15.90, the biggest intraday gain since Oct. 13, before trading at HK$15.66 at 1:57 p.m. local time, reported local press. The stock fell 3.5 percent in morning trading, before it reported first-half earnings.

Operating profit margin was 4.7 percent, above the expected full-year number of 1 percent to 2 percent, the company said in a statement to Hong Kong’s stock exchange today. Net income was HK$555 million ($72 million) in the six months ended Dec. 31, compared with HK$2.14 billion a year earlier.

“Many people were thinking it would make a loss but it came out with a net profit,” said for Bloomberg Andrew Sullivan, Principal Sales Trading at Piper Jaffray Asia Securities Ltd. in Hong Kong. “It also sounds more positive. The company is well- positioned to make progress in restructuring despite the tough operating environment.”

Esprit's advance made it the biggest percentage gainer on the benchmark Hang Seng Index, which fell 0.7 percent. The Asian H&M competitor surged 25 percent in more than four times its 30-day average volume after posting a better-than-expected 74 percent fall in first-half net profit, triggering a short squeeze. Traders said Esprit was an under-owned stock, expecting more strength ahead for the retailer with funds looking to roll back into its stock as the outlook on the company improves. Esprit is now up 77.2% this year after plunging 73% in 2011 from HK$37.80 to HK$10.20, reported Reuters.