Prada shares surge as chairman forecasts improvement

[GENEVA] Prada SpA shares rose as much as 15 per cent after Chairman Carlo Mazzi forecast that the Italian luxury- goods maker will return to growth in sales and earnings next year, helped by cost-cutting and online expansion in Asia.

This year "is a turning point and we are now firmly on the path to sustainable growth in revenues and earnings from as early as 2017," Mr Mazzi said on an Aug. 26 conference call after the Hong Kong market closed.

First-half earnings before interest, tax, depreciation and amortisation (EBITDA) fell 25 per cent to 330 million euros (S$502.76 million), dropping slightly less than analysts estimated.

Prada said it aims to double its e-commerce sales in each of the next three years by increasing the number of categories it offers online, particularly shoes, and expanding its social media activities.

Analysts at Sanford C. Bernstein have said the Italian company has been hurt harder than rivals in the luxury industry because it's been slow to invest in e-commerce and its handbags are too expensive.

Revenue for the six months ended July fell 15 per cent to 1.55 billion euros on weak demand in China and a drop in tourism in Europe after terrorist attacks.

"The decline in sales was largely offset by the improvement in expense control," wrote Linda Huang, an analyst at Macquarie.

The shares gained 12.4 per cent to HK$24.45 (S$4.29) as of 3:14 pm in Hong Kong. The results were released on Aug 26 after the close of trading.

BLOOMBERG