Prada shares leap 11%

Paris - Prada SpA surged by the most since December 2011 after beating analysts’ estimates for its first-half profit as cost controls helped the maker of luxury goods mitigate falling sales in Asia.

The shares jumped by as much as 11 percent in Hong Kong trading before paring gains to a 6.8 percent advance to HK$33 as of 10.43am local time. Net income fell 23 percent to 188.6 million euros ($213 million) in the six months through July, Prada said on Tuesday in a statement, against the median forecast of 175.4 million euros according to six analysts surveyed by Bloomberg.

The “strong beat” on second-quarter earnings and “limited margin compression, albeit on low expectations, could support the shares near-term,” Citigroup Inc. analyst Thomas Chauvet wrote in a note. August was volatile for Prada, reflecting the impact of the global stocks correction on markets such as Hong Kong and the US, while Macau “remains very difficult”, he wrote.

Prada has slowed expansion, pledging to open about half the number of stores it did last year, as demand for luxury goods slows in the China region following a government clampdown on extravagance. In a bid to reignite sales and reverse a slump in its share price, the Milan-based company introduced the Inside bag in July, with prices starting at about 2 000 euros.

Asia instability

“The global economic environment is still volatile and recent instability in Asia has not helped ease the situation,” Prada said. Still, the company said it’s “confident” in its ability to adapt as it streamlines operations and reduces costs such as “discretionary expenses”.

Prada contrasts with Hermes International SCA and LVMH Moet Hennessy Louis Vuitton SE, which reported higher first-half profit despite some difficulties in Hong Kong, Macau and China. Both companies have benefited from perceptions that their products are more exclusive, with Hermes limiting supply and LVMH revamping Louis Vuitton’s handbag offer.

* With assistance from Daryl Loo in Singapore

BLOOMBERG