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Prada shares soar 20 per cent as firm returns to sales growth

[HONG KONG] Shares in Prada surged 20 per cent on Monday after the Italian luxury goods maker said it had stemmed a slide in sales in the second half of 2017 and it expected to see growth continue this year.

Criticised 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 euros.

New products, estimated to be about 60 per cent 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$40 (S$6,71) in early Monday trade, its highest level since June 2015 and addingUS $2 billion to its market capitalisation.

Alessandra Cozzani, Prada's chief financial officer, said in a conference call on Friday that the firm had seen double digit organic sales growth in Greater China in the second part of the year and the first month of 2018.

Prada generates over 30 per cent 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 rivals.

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.