Shares in fashion retailer Esprit fell as much as much as 7.0 percent in Hong Kong Wednesday after the company released a third-quarter profit warning, telling shareholders to prepare for a "substantial loss".
The stock was as low as HK$10.12 ($1.30) in morning trade at the city's stock exchange where it is listed, a day after the company said it saw around HK$2.76 billion in losses originating from its mainland China operations.
The benchmark Hang Seng Index rose 0.66 percent in morning trade.
The bulk of Esprit's loss stems from an impairment of goodwill in the company's acquisitions in China, estimated to be as much as HK$2 billion, the clothing retailer said in a filing to the Hong Kong stock exchange late Tuesday.
The goodwill impairment arose from the company's current development in its China business, it said without elaborating.
Esprit will also see provisions and impairments relating to the closing of 16 loss-making stores estimated to be as much as HK$300 million, along with other costs.
"The group is expected to record a substantial loss in the second half of the financial year," the company said, adding that it would contribute to "an overall substantial loss" for its financial year ending 30 June, 2013.
Esprit reported a net loss of HK$465 million for the six months ending December as the company continued its four-year transformation drive, for which it raised $667 million last November through a share sale.
The company, which was founded in San Francisco in 1968 and is headquartered in Hong Kong, announced its exit from Spain, Denmark and Sweden to focus on Asia as part of the transformation after it saw a 98 percent plunge in net profit in 2011.
While about 80 percent of Esprit's revenue is from Europe, the Asia-Pacific region -- and specifically China -- is important to its turnaround plan.