Tsann Kuen's ventures in China in the balance

The resignation of the Tsann Kuen Group's (燦坤實業) CEO over the weekend could jeopardize the outlook for its business expansion in China, analysts said yesterday.

Richard Yu (余敬倫) submitted his resignation to the company's board on Saturday, citing health concerns. Yu wasn't available for comment yesterday.

"Developing retail business in China, with its vast territory, is already a challenge for Tsann Kuen, which is having trouble with weak inventory management and logistic support, including its information management system," said Chen Yen-liang (陳彥良), an analyst at Yuanta Core Pacific Capital Management (元大京華投顧).

Tsann Kuen, Taiwan's largest home appliance and consumer electronics retailer in terms of sales, has more than 50 outlets in China.

It has to create a separate company for each store to sidestep China's restrictions on the establishment of chain stores, and this has led to management problems.

"The sudden resignation of Yu, who is managing the company's retail expansion in China, could have a significant effect on its development in this field," Chen said.

Yu served as a vice president at Lite-On Group (光寶), a local manufacturer of computers and related equipment, before joining Tsann Kuen in January last year.

Tsann Kuen's chairman Wu Tsann-kuen (吳燦坤) invited Yu to join the group following his success in helping to orchestrate the four-way merger of Lite-On Electronics Corp (光寶電子), Lite-On Technology Corp (源興科技), Silitek Corp (旭麗) and GVC Corp (致福) in 2002.

Last year, Tsann Kuen's annual sales amounted to NT$37 billion, an increase of 70 percent from 2002, with earnings per share reaching NT$5. More than 50 outlets were also opened in China during Yu's tenure.

The group downplayed Yu's resignation yesterday, saying that the incident was not expected to have any significant impact on the company's operation.

"The organization of developing companies is always being adjusted," said Eileen Shou (守寍寍), a company spokeswoman. "The resignation is unlikely to affect our operation."

Tsann Kuen has established a provisional operations commission and created six positions for chief operations officers. They will take over the implementation and formulation of group strategy, while Wu will also serve as general manager concurrently with his position as chairman.

The group has set up an ad hoc CEO-recruiting committee in a bid to find a suitable replacement for Yu in time for the shareholders' meeting in May.

The personnel change seems to have had an impact on investor confidence, as Tsann Kuen's share price dropped to NT$60 yesterday from NT$64 last Friday, a slide of 6.2 percent.

But the negative effects might not last long, as the group's chairman is sure to do everything in his power to stabilize the situation, according to another analyst.

"We estimate that the impact of the sudden resignation on the share price should continue for no more than one or two weeks. The company's strong leader, Wu Tsann-kuen, should be able to lead the group to weather the difficulties," said Chris Wang (王政中), a deputy manager at Barits International Securities (倍利證券).