--Esprit's shares surge to their biggest daily percentage gain in 14 years after announcement of new CEO

--New CEO will receive EUR1.5 million (US$1.9 million) a year with an annual bonus of as much as EUR1.5 million

--Fashion retailer's chief will be based in Ratingen, Germany

HONG KONG--Shares of Esprit Holdings Ltd.'s (0330.HK) shares jumped by their biggest daily percentage gain for 14 years Tuesday as investors welcomed the fashion retailer's announcement it has appointed a senior executive from Zara parent Inditex SA as its new chief executive. The move resolves a major uncertainty weighing on the blue-chip company.

Esprit's Hong Kong-listed shares were up 28% at 12.76 Hong Kong dollars Tuesday, down slightly from an earlier high of HK$13.80. It was the biggest daily percentage gain since a 46% rise on Jan. 21, 1998. The blue-chip Hang Seng Index was 0.4% higher Tuesday.

Analysts said the appointment of Jose Manuel Martinez Gutierrez as chief executive removes a major overhang on the stock in the wake of the unexpected resignations of the company's chairman and chief executive in June.

Shares of Esprit--once described by an executive of the company as "the bluest of blue chips" and changing hands for as much as HK$130 in 2007--fell below HK$10.0 from more than HK$13.00 after the resignations. The departures came six months after the company's chief financial officer quit fueling worries about management stability and the outlook for a turnaround plan that kicked into full gear less than a year ago.

Mr. Martinez, 42, was group director of distribution and operations at Inditex, the world's largest fashion retailer by sales and owner of the fast-fashion chain Zara. The appointment will take effect at the end of September or earlier, Esprit said Tuesday.

"Mr. Martinez has a track record of outstanding leadership that will be critical to executing Esprit's transformation plan," Esprit's chairman Raymond Or said in a statement.

Mr. Martinez, the third Esprit's CEO in five years, will be based in Ratingen, Germany. His salary will be 1.5 million euros (US$1.9 million) a year, with an annual bonus of as much as EUR1.5 million guaranteed for the first two years. His signing bonus is EUR1.25 million and he gets 5 million share options.

CLSA analyst Mariana Kou said the appointment is a positive development for Esprit given Mr. Martinez's strong retail background, but the question now is whether he will be able to help the company transform itself given the many challenges it is facing.

Mr. Martinez's background is operational rather than marketing and branding, Macquarie research analyst Gary Pinge said, suggesting that significant changes are unlikely. "The focus is to be execution of the existing transformation plan," Mr. Pinge added.

Esprit's deputy chairman Paul Cheng told reporters Tuesday the transformation plan may be fine tuned when Mr. Martinez takes charge but he doesn't expect big changes.

Esprit remains committed to Europe despite the debt crisis there weighing on demand, Mr Cheng added.

The company has struggled to fend off competition from Inditex, and Sweden's Hennessey & Mauritian ABC which sells its products under the H&M brand.

Last September, after reporting a 98% decline in profit for the fiscal year through June, Esprit declared it had "lost its soul" and announced plans to exit its North America business, close retail operations in three European countries and invest more than US$2.32 billion over the next four years to rebuild its brand.

In February, the company reported weak, yet improved results--a 74% drop in first-half profit. It said its four-year "transformation journey" is well under way.

Write to Chester Yung at chester.yung@dowjones.com

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