Prada shares soar as China de­mand spurs re­turn to sales growth

Arab News - - BUSINESS -

HONG KONG: Shares in Prada surged 14 per­cent on Mon­day af­ter the Ital­ian lux­ury-goods maker said it had stemmed a slide in sales in the sec­ond half of 2017 and ex­pected to see growth con­tinue this year.

Crit­i­cized as slow to re­spond to new trends, par­tic­u­larly for in­for­mal clothes and shoes, Prada has seen profit fall since 2014 even as com­peti­tors such as Ker­ing and LVMH have boosted sales. Core profit dropped 7.3 per­cent last year to €588 mil­lion ($725 mil­lion).

New prod­ucts, es­ti­mated to be about 60 per­cent of its to­tal of­fer­ings, as well as ro­bust de­mand from Chinese con­sumers, had helped to pull the com­pany out of a “grey area,” it said.

The Hong Kong-listed stock jumped to HK$37 ($4.7) in Mon­day trade, adding $1.5 bil­lion to its mar­ket cap­i­tal­iza­tion. At one point it climbed as high as HK$40.

The firm saw dou­ble-digit or­ganic sales growth in Greater China in the sec­ond part of last year and the first month of 2018, Alessandra Coz­zani, Prada’s chief fi­nan­cial of­fi­cer, said in a con­fer­ence call on Fri­day.

Prada gen­er­ates more than 30 per­cent of rev­enue from Chinese con­sumers at home and abroad. It is seek­ing to bur­nish its brand in China with a new res­i­dence pro­ject in Shang­hai for fash­ion shows and ex­hi­bi­tions, and is putting more effort into e-com­merce, an area where it has lagged be­hind ri­vals.

It also ap­pointed a new global dig­i­tal direc­tor last year to drive online sales glob­ally — a change from 2014, when CEO Pa­trizio Bertelli said it would fo­cus on phys­i­cal stores — and has since been forg­ing tie-ups with blog­gers in China to at­tract young con­sumers.

“We believe the worst is gone,” said Wal­ter Woo, an­a­lyst at CMB In­ter­na­tional Cap­i­tal in Hong Kong, who raised his rat­ing on the stock to a “buy” and noted that the firm’s fore­cast for mid to high sin­gle-digit sales growth in 2018 was above mar­ket es­ti­mates.

Prada is one of the few lux­ury brands avail­able to in­vest in Hong Kong which helped spur its dra­matic gains on Mon­day, said Alex Wong, a direc­tor at Am­ple Fi­nance Group in Hong Kong.

“We are quite bullish on lux­ury seg­ment over­all, par­tic­u­larly when China con­tin­ues to lead the growth,” he added.

A model dis­plays a cre­ation from the Prada Spring/ Sum­mer 2018 show at Mi­lan Fash­ion Week. (Reuters)

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