Daphne Shares Plunge on Profit Decline Forecast: Hong Kong Mover

Daphne International Holdings Ltd. (210), the footwear maker that sells Aerosoles shoes in China, plunged by the most in over four years after saying second-half profit will decline with slowing sales.

Daphne shares fell as much as 17 percent to HK$4.80 in Hong Kong, heading for the biggest decline since Oct. 27, 2008. They traded at HK$4.80 as of 2:47 p.m. local time. It is the worst performer in the MSCI Asia Pacific excluding Japan Index.

Slowing economic growth in China, which is targeting more sustainable expansion, has crimped industrial profits and consumer spending, hurting retailers. Daphne said same-store sales for the second quarter ended June fell as much as 14 percent from a year earlier.

“The biggest concern is the operating cost -- high rent and staff cost -- these are the two killers,” said Huei Chen Flannery, an analyst at KGI Securities Co. in Shanghai. “There’s more competition from e-commerce, competition from cheaper local shoe brands. People don’t have that much money these days.”

Profit in the first half will have a “meaningful decline” because of slower sales growth and lower margins, Daphne said yesterday in a statement to the Hong Kong stock exchange.

HSBC downgraded the stock to underweight from overweight and cut its share-price target by 59 percent to HK$4.8, analysts led by Chris Zee wrote in a report dated yesterday. Daphne shares have lost 52 percent this year, compared with a 6 percent loss for the benchmark Hang Seng Index.

Chinese Finance Minister Lou Jiwei yesterday signaled the economy may expand less than its target of 7.5 percent this year.

To contact the reporter on this story: Alan Wong in Hong Kong at awong478@bloomberg.net

To contact the editor responsible for this story: Hwee Ann Tan at hatan@bloomberg.net

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