Prada up in HK on sales recovery forecast

Paris

PRADA SpA on Monday jumped in Hong Kong trading amid expectations that same-store sales growth will speed up this year, after it reported a slight fall in full-year sales as fewer Chinese splurged on US$2,950 handbags and other luxury products.

Prada shares climbed 3.9 per cent to HK$44.25, the highest close in two weeks. They rose as much as 6 per cent earlier on Monday. The benchmark Hang Seng Index was little changed.

"We expect a re-acceleration in retail same-store sales growth and greater operating leverage," Citigroup Inc analysts led by Thomas Chauvet wrote in a note on Monday, referring to outlets open at least a year and citing factors including more moderate space growth, signs of turnaround at the Miu Miu brand, the Prada brand's repositioning in Japan and the US, and introduction of handbags with lower price points.

Revenue fell one per cent to 3.55 billion euros (S$5.46 billion) in the 12 months through January, the Milan-based owner of brands including Miu Miu and Car Shoe said in preliminary figures issued on Sunday, against the median analyst estimate of 3.57 billion euros compiled by Bloomberg.

It announced plans in December to open fewer stores in fiscal 2016 and introduce more bags priced between 1,000 euros and 1,200 euros.

While the new handbags at lower price points "has not been enough to offset overall decline at the brand so far, this should be key for recovery in 2015", Barclays plc analysts led by Vineet Sharma wrote in a note on Monday.

Sales grew 8 per cent in both Japan and in the Americas at current exchange rates during the financial year 2014. They dropped 1 per cent in Europe as tourists' spending dropped and domestic demand weakened.

Sales in the Asia-Pacific fell 5 per cent, mainly because of the deteriorated markets in Hong Kong and Macau during the second half of the year.

Chinese President Xi Jinping's two-year crackdown against graft has affected sales of luxury goods in Hong Kong and gamblers' spending in Macau, the world's largest casino gambling hub.

Prada will continue to focus on marketing and retail investments in the medium term, chief executive Patrizio Bertelli said in Sunday's statement. The luxury brand is tentatively scheduled to announce its audited results on March 26, according to the statement. BLOOMBERG