Business World

Wednesday 17 September 2014

Prada sales 'disappoint' as demand for luxury falters

Vinicy Chan

Published 08/08/2014 | 00:00

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A model presents a creation from the Prada Autumn/Winter 2014 collection. The company has seen demand falter. REUTERS/Alessandro Bianchi

Prada, the Milan-based luxury handbag-maker, posted the slowest half-yearly sales growth in three years as demand weakens in some Asian countries and in Europe amid economic and political uncertainties.

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Prada's revenue climbed 1pc to €1.75bn in the six months through July, according to the company's preliminary figures filed to Hong Kong's stock exchange. That compared with the median estimate of €1.74bn from four analysts compiled by Bloomberg.

Prada's full-year guidance "looks unachievable" after "disappointing" sales, Stephanie D'Ath and Ashley Wallace, analysts at Bank of America Merrill Lynch, said. "We expect the stock to remain under pressure as more earnings downgrades come through after second-quarter results."

Italy returned to recession in the second quarter and German factory orders dropped the most since 2011 as slowing global growth and political tensions including the crisis in the Ukraine threaten the euro area's recovery.

Moet Hennessy, Louis Vuitton and Hermes International have also reported slower sales growth amid weaker consumption in Asia.

The sales growth was the weakest half-yearly figure since the company listed on the Hong Kong Stock Exchange in June 2011. Sales rose 11.6pc in the same period last year and fell 0.6pc in the first quarter. Prada dropped 1.3pc to close at HK$53.65 in Hong Kong.

"The group has operated in a more difficult political and macroeconomic environment than expected with unfavorable exchange rates and a general fall in consumption," Prada chief Patrizio Bertelli said in the statement. The company will implement "rigorous" cost controls to protect its margins, he said.

In April, Prada forecast same-store sales will rise at a "low single-digit" pace in the financial year through January 2015, less than last year's 7pc increase. Growth will be "mid single-digit" the year after, it said then.

The company will announce its interim results on September 19.

Retail sales in the first half rose 1pc to €1.44bn, while sales at the Italian retailer's 566 directly operated stores climbed 5pc. (Bloomberg)

Irish Independent

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