Esprit Holdings Ltd missed earnings estimates for the fifth straight year after increased advertising failed to lure customers back to the apparel retailer's stores. The stock dropped the most in a month.

Esprit shares slumped as much as 8.8 percent, the most since Aug 8, in Hong Kong trading. Net profit rose to HK$873 million ($112.6 million) in the 12 months ended June 30 from HK$79 million a year earlier amid a one-time gain from store closures. That lagged the HK$995.8 million average estimate of 13 analysts compiled by Bloomberg.

European sales declined as the region's debt crisis eroded demand, underscoring the challenge for incoming Chief Executive Officer Jose Manuel Martinez Gutierrez, who starts work on Wednesday. The former Inditex SA executive is charged with overseeing a turnaround after a slump in Esprit's profit and a series of top management departures earlier this year.

"We remain skeptical about the promises made and the hopes pinned on the transformation plan," said Steven Leung, Hong Kong-based institutional sales director at UOB Kay Hian Ltd. "We aren't sure if the new CEO will remain committed to the plan or what kind of strategy he's going to adopt."

Net income in the second half was HK$318 million, compared with a loss of HK$2.06 billion a year earlier, according to data compiled by Bloomberg.

Esprit, which lost 73 percent of its market value last year, reported sales of HK$30.2 billion, a decline of 11 percent, according to a statement to the Hong Kong stock exchange. It booked a HK$696 million write-back on a provision made for store closures in North America. Marketing expenses rose to HK$1.6 billion from HK$984 million.

The company's profit in the year ended June 2011 declined 98 percent, the biggest drop posted since at least 1997, because of the recession in Europe, which accounted for 79 percent of its sales. Sales in Europe dropped 11 percent to HK$23.7 billion in the year just ended, with Germany, Esprit's biggest market, falling 9 percent.

Martinez will take the place vacated by Ronald Van der Vis, who announced his departure in June. Chairman Hans Joachim Koerber quit a day after Van der Vis. The departure of both executives had raised doubts over succession as Esprit struggles to restructure its business.

Van der Vis, hired in 2009, last year laid out a turnaround plan that included makeovers of existing stores and new ones in China.

Esprit's capital expenditure is expected to reach HK$1.5 billion in the current financial year, compared with HK$1.4 billion in the year just ended. Earnings per share were 68 Hong Kong cents, compared with 6 Hong Kong cents a year earlier.

Shares of Esprit surged the most since 1998 on Aug 7 after the appointment of Martinez on optimism the executive who ran distribution and operations for the owner of Zara stores will be able to replicate some of Inditex's success and help Esprit recover from a three-year profit decline.

The Hong Kong-traded apparel company was established in 1968 in San Francisco, when Susie and Doug Tompkins started selling clothes out of the back of their station wagon.

(HK Edition 09/27/2012 page2)