Prada quarterly profit drops, says outlook uncertain
Reuters
Published Dec 05, 2014 12:52
Prada quarterly profit drops, says outlook uncertain
By Clare Baldwin and Meg Shen
HONG KONG (Reuters) - Italian luxury goods maker Prada SpA (HK:1913) posted a 43.8 percent drop in third-quarter profit and said it faced increased competition amid an uncertain economic outlook.
Prada's net profit for the three months ended Oct. 31 was 74.47 million euros (58.63 million pounds), lower than the 97 million euros forecast by brokerage CLSA and the 112 million euros forecast by JPMorgan.
Overall sales fell 5.6 percent, while sales of higher-margin leather goods dropped 9.1 percent.
Demand in the Asia Pacific region -- which accounts for more than a third of sales and is Prada's biggest regional market -- has slackened as an uncertain economic outlook, and China's crackdown on corruption, has put a damper on trips abroad by wealthy Chinese tourists.
Pro-democracy protests have also blocked access to major Hong Kong shopping districts for nearly two and a half months.
About 10 percent of Prada's sales come from Hong Kong, according to CLSA. October retail sales for the city, the first broad snapshot of the economic impact of the protests on the core shopping areas in the Chinese-ruled city, showed a double-digit impact on sales of jewellery, watches, clocks and valuable gifts and a high single-digit impact on clothing sales.
Prada, known for its expensive leather handbags and Miu Miu-brand dresses, was among the retailers that shortened their business hours during the protests.
"We expect at least three more quarters of weak top-line trends, declining margins and negative EPS (earnings per share) growth for Prada, so we recommend investors use recent share price strength as a selling opportunity," Credit Suisse research analyst Karim Salamatian wrote in a note late last month.
Prada shares closed down 1.56 percent at HK$47.25 compared with a 0.71 percent rise in the benchmark Hang Seng index (HSI). Prada shares have fallen by nearly a third this year.
(Editing by Mark Potter)
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