Prada loses US$700m in market value
HONG KONG: China’s slowdown has claimed another corporate scalp, with shares of Italian fashion house Prada SpA sliding the most since January after a pullback in the world’s biggest consumer market contributed to an unexpected drop in annual profit.
The Hong Kong-listed luxury group attributed a slump in Asia mostly to Chinese tourists pulling back spending, here, and in Macau because of the weakness in the yuan.
Other luxury brands including Gucci had seen the impact of softer buying by Chinese tourists offset by increased spending on the mainland, but Prada failed to get a similar boost from Chinese spending at home, said Citigroup analysts.
Prada’s China sales were flat for the year, a “significant swing” after a first-half gain of 17 per cent, Citigroup noted.
Yesterday’s stock plunge after the disappointing earnings shaved US$700 million (RM2.85 billion) off the company’s market value.
Chinese consumers have turned cautious amid the slowest economic expansion in almost three decades and a trade war with the United States.
While cars and iPhones have seen bigger slumps so far, Prada’s results would spark worry that China’s newly wealthy middle class was scaling back on high-end purchases.
For an industry that relies on Chinese demand for 30 per cent of US$1 trillion in global luxury spending, that’s a chilling prospect.
Prada’s operating profit declined 10 per cent to €323.8 million (RM1.49 billion), falling short of the €378 million predicted by analysts.
Prada shares slumped as much as 9.2 per cent in early trading, here, yesterday, the biggest intraday drop since January 14. The stock had lost about 36 per cent over the past year.
It has seen its earnings tumble for four straight years, falling more than 50 per cent since its 2014 peak as the group raised handbag prices and took too long to come up with products to follow up its best-selling Galleria line.