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Esprit Climbs After Hiring Executive From Zara

Esprit Holdings Ltd., the clothing retailer rebuilding its brand, jumped the most in almost a year in Hong Kong trading after hiring a former Zara executive to manage product creation and design.

The stock rose as much as 7.8 percent to HK$14.1, headed for the biggest gain since Nov. 15, 2012, after saying it appointed Rafael Pastor Espuch as chief product officer.

The company in September predicted a return to profitability in the fiscal year ending June, after reporting its first annual loss since a 1993 listing amid a revenue slump and competition from Inditex SA’s Zara and Hennes & Mauritz AB. Retail sales in Europe, Esprit’s biggest market, jumped 5.6 percent in local currency terms in the three months through September as stores performed better.

“Esprit has put a strong management team in place,” Tanuj Shori, a Hong Kong-based analyst at Nomura wrote in a research note published today, “We estimate that it would still take several quarters, or even years, to overhaul the entire supply chain.”

Pastor worked for 18 years at Zara, according to a statement from Esprit to Hong Kong’s stock exchange yesterday. Inditex is the world’s biggest clothing retailer.

Pastor will join Jose Manuel Martinez Gutierrez, who also worked at Zara before becoming Esprit’s chief executive officer. The Hong Kong company that makes 79 percent of its sales in Europe lost two top executives in 48 hours in June last year.

Retail Shift

Pastor replaces Melody Harris-Jensbach, who quit earlier this month and will be a consultant on several projects next year.

While Europe retail sales improved, Esprit yesterday posted a 5.2 percent decline in fiscal first-quarter overall revenue to HK$6.55 billion ($845 million), according to a separate filing to Hong Kong’s stock exchange. The decline was largely because of a 14.5 percent drop in retail sales in Asia, the company said.

Esprit was helped in Europe by its “shift from the wholesale to retail-driven model,” said Nomura’s Shori. Comparable store sales, which strip out the effect of newly opened locations, rose 1.6 percent for Esprit’s retail operations in its fiscal first quarter.

The stock traded at HK$13.76 as of 11:50 a.m. Hong Kong time. It has advanced 28 percent this year, compared with a 1.7 percent gain for the benchmark Hang Seng Index.

Harris-Jensbach will leave Esprit on tomorrow to pursue “new and broader” opportunities, the company said in a separate filing last week. Pastor will start as chief product officer on Nov. 4.

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