Prada first-half net profit down 23 percent

Italian luxury goods maker Prada SpA reported a 23 percent fall in first-half net profit on Tuesday, hurt by a slowdown in Asia, particularly in Hong Kong and Macau.

Asia-Pacific, Prada's biggest market, has been roiled in the past few months by stock market turmoil in China and signs of growing strains in the world's second-largest economy.

Second-quarter net income of 129.8 million euros ($147 million), however, beat a 118.8 million forecast by analysts on Starmine, but was still down from 139.5 million in the May-July period a year ago.

Chief Financial Officer Donatello Galli told analysts on a conference call that the month of August and the first few days of September had continued to be volatile.

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"You cannot expect us to skip the turbulence we have seen so far on the markets," Galli said. "In some places consumption patterns are linked to the behaviour of financial markets more than in some others."

Slower business in Hong Kong and Macau weighed on sales and margins in the first half of the year, Prada said.

For the six months ended July 31, the group's net income fell to 188.6 million euros, or 0.07 euros per share, from 244.8 million a year earlier.

Galli said Macau had suffered because of a steep drop in the number of very wealthy people going there to gamble.

"The question is whether these high-end gaming people will go back to Macau ... Of the two I would bet a little bit more on Hong Kong," Galli said.

Chairman Carlo Mazzi told Reuters earlier this month that the company was trying to negotiate lower shop rents in Hong Kong and Macau.
Galli said Prada was confident the landlords would soften their position.

"Landlords are tough but they cannot be unreasonable for ever," he said. "I don't think they really want big names to shut down their shops."

First-half revenue rose 4.2 percent to 1.82 billion euros, matching preliminary figures released last month.

Patrizio Bertelli, who shares the role of chief executive with his wife Miuccia, said on the conference call that the fundamental appeal of luxury goods remained.

"The generations of course change, they have different needs, but the concept of luxury is there ... for any social class or new types of customers."

Shares in Prada closed up 1.8 percent at HK$31 on Tuesday. The shares have fallen 29.5 percent this year, compared with a 9.1 percent slide in Hong Kong's benchmark Hang Seng index.

($1 = 0.8852 euros)