Prada Third-Quarter Profit Drops More Than Analysts Expected

Updated on

Prada SpA reported a bigger-than-expected 44 percent drop in third-quarter profit as pro-democracy protests in Hong Kong weighed on the luxury-goods maker’s Asian sales and leather-goods revenue declined.

Net income slid to 74.5 million euros ($92 million) in the three months through October, the Milan-based owner of brands including Miu Miu and Church’s said in a statement today. The average analyst estimate was 108.6 million euros. Sales dropped 5.6 percent to 801 million euros.

The Hong Kong protests led to a drop in consumption as some luxury-goods makers shuttered stores. Weak spending by tourists in Europe also weighed on demand, and leather-goods sales fell 11 percent at constant currency rates. Prada has insufficient new handbags in the 1,000-euro to 1,500-euro price range, according to Mario Ortelli, an analyst at Sanford C. Bernstein.

“The Prada brand is on the back foot,” Luca Solca, an analyst at Exane BNP Paribas, wrote by e-mail. The results are a “big negative surprise.”

Sales from the Far East, which represents more than a third of the total, dropped 13 percent, excluding currency shifts. “Trends have significantly deteriorated” in the region, the company said in a presentation today.

The shares fell 1.6 percent to HK$47.25 today in Hong Kong before the results were released after the close of trading. They’ve lost almost a third of their value this year.

Burberry Group Plc said last month it sees a tougher market for luxury goods after currency fluctuations and weak Asian demand led to a drop in earnings.

Prada has said profit margins will remain under pressure in the second half, while annual sales will be little changed.

The company said today it plans to take measures to boost efficiency in the short term.

(Updates with Hong Kong disruptions in first paragraph.)
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