x Abu Dhabi, UAEFriday 28 July 2017

Luxury goods warning takes its toll on Prada

What's Down: Shares of the Italian fashion company Prada fell nearly 4 per cent yesterday to their lowest in three weeks as investors cashed out after the British fashion house Burberry warned that a slowdown in China could hit earnings.

Shares of Prada fell as much as 3.9 per cent to HK$57.65, their lowest since August 24. Mike Clarke / AFP
Shares of Prada fell as much as 3.9 per cent to HK$57.65, their lowest since August 24. Mike Clarke / AFP

Shares of the Italian fashion company Prada fell nearly 4 per cent yesterday to their lowest in three weeks as investors cashed out after the British fashion house Burberry warned that a slowdown in China could hit earnings.

The profit warning came as recent Chinese data signalled a further slowing of the world's second-largest economy, unnerving investors about its impact on consumer demand.

China's retail sales growth of all consumer goods including luxury goods slowed to 13.2 per cent year-on-year last month to 1.67 trillion yuan from 18.1 per cent growth in December, official data showed.

Retail sales of gold, silver and jewellery grew 14.9 per cent year-on-year to 17.9bn yuan in August, compared with 35.6 per cent growth in December.

"Investors are more down to earth nowadays.

"They look at a luxury stock in a sensible way and would make no mercy to unload the shares if there is any sign of slower growth," said Alfred Chan, the chief dealer at Cheer Pearl Investment.

"Burberry's warning has rung the bell of a potential major correction ahead."

Shares of Prada, which competes with Louis Vuitton and Gucci, fell as much as 3.9 per cent to HK$57.65, their lowest since August 24, lagging a 0.84 per cent gain in the Hang Seng Index.

Burberry's profit warning on Tuesday gave the clearest sign yet that a slowdown in China and Europe's debt crisis are bringing a nearly three-year boom in demand for luxury goods to an end.

"Prada will not be immune," Gloria Tsuen, an analyst at CIMB, wrote in a research note.

"We think the long-awaited slowdown in luxury consumption driven by global economic and political uncertainties is finally starting to have a meaningful impact on performance."

Ms Tsuen downgraded Prada to neutral from outperform.

Shares of luxury retailer Emperor Watch and Jewellery were also hit, with the stock down 1.3 per cent.

* Reuters