Prada plunges to 2-year low on Hong Kong protests, leather goods
By Bloomberg
Prada SpA tumbled to the lowest level in more than two years in Hong Kong trading after reporting a bigger-than-expected 44 percent drop in third-quarter profit.
Shares of the luxury-goods maker dropped as much as 6.7 percent to HK$44.1, the lowest intraday level since June 2012. They have declined 36 percent this year. The stock traded 6 percent lower as of 9:45 a.m., while the benchmark Hang Seng Index gained 0.4 percent.
Net income slid to 74.5 million euros ($92 million) in the three months through October, as the city’s pro-democracy protests weighed on Asian sales and leather-goods revenue declined. That was lower than the average estimate of 108.6 million euros from nine analysts. Sales dropped 5.6 percent to 801 million euros, the Milan-based owner of brands including Miu Miu and Church’s said in a statement on Dec. 5.
The Hong Kong protests led to a drop in consumption as some luxury-goods makers shuttered stores. Weak spending by tourists in Europe also weighed on demand, and leather-goods sales fell 11 percent at constant currency rates. Prada plans to widen product range, including the introduction of goods in the 1,000- euro to 1,200-euro price range, according to Vineet Sharma, an analyst at Barclays Plc.
“Given the weak and volatile trading, timing of new store openings, limited understanding on the success of the product launches, visibility and confidence on forecasts remains low,” Sharma wrote in a note dated Dec. 6.
Sales from the Far East, which represents more than a third of the total, dropped 13 percent, excluding currency shifts. “Trends have significantly deteriorated” in the region, the company said in a presentation.
Burberry Group Plc said last month it sees a tougher market for luxury goods after currency fluctuations and weak Asian demand led to a drop in earnings.
Prada has said profit margins will remain under pressure in the second half, while annual sales will be little changed.
The company said it plans to take measures to boost efficiency in the short term.
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