Prada shares tumble as company loses $5bn market value
By FashionUnited
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Fashion
Six months after its stock market debut, Prada has seen a fall in its shares, losing over $5bn of its market value. The Italian luxury goods company has seen its sales growth fall from 42% to 32% in Asia, it's largest market, as investors call for the Chinese
shoppers to curb spending.According
“The golden time, or the high-growth period, for many luxurious goods retailers is probably over,” said Chan. Sales growth at high-end stores open more than a year may drop by as much as six percentage points in 2012, she said.
“Chinese shoppers could cut back spending on luxury items in the near term, as the stock markets and the property markets have corrected steeply this year,” said Eddie Lau, head of regional consumer research at Citigroup. “The wealth effect is fading.”
Prada’s stock has lost 32 percent from its July 27 record of HK$49.45, wiping more than $5 billion off its market value. The benchmark Hang Seng Index has lost 19 percent in the same period. The luxury goods maker, which raised $2.5 billion in June through Hong Kong’s biggest public offering this year, still trades at 20.52 times expected earnings, more than double that of the benchmark.
“Prada’s substantial store roll-out plan makes it particularly vulnerable to a sales slowdown or decline,” said Rey Wium, an analyst at Renaissance BJM in Johannesburg, who has a “hold” rating on the security.
Prada’s worldwide sales so far this year have grown with the global luxury industry, which Boston-based consultant Bain & Co estimated in October is set to rise 10 percent in 2011. Prada sales grew 25 percent for the first nine months of this year from a year earlier and its Asia Pacific revenue, excluding Japan, grew 39 percent.
Image: Prada AW11