HONG KONG Shares of Italian fashion company Prada SpA (1913.HK) fell nearly 4 percent on Wednesday to their lowest in three weeks as investors cashed out after British fashion house Burberry (BRBY.L) warned that a slowdown in China could hit earnings.
The profit-warning came as recent Chinese data signaled 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 percent year-on-year in August to 1.67 trillion yuan ($263.6 billion) from 18.1 percent growth in December, official data showed. Retail sales of gold, silver and jewellery grew 14.9 percent year-on-year to 17.9 billion yuan in August, compared with 35.6 percent 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, 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 (LVMH.PA) and PPR's (PRTP.PA) Gucci, fell as much as 3.9 percent to HK$57.65, their lowest since Aug 24, lagging a 0.84 percent gain in the benchmark Hang Seng Index .HSI.
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."
Tsuen downgraded Prada to neutral from outperform.
Shares of luxury retailer Emperor Watch and Jewellery Ltd (0887.HK) were also hit, with the stock down 1.3 percent.
China is the world's third-biggest market for personal luxury goods, with total sales of about 160 billion yuan ($25 billion) a year. In the next three years, it is expected to leapfrog Japan and the United States to take the top spot.
Luxury companies, which rebounded strongly from the 2008/9 financial crisis, had withstood the ensuing global slowdown as demand from fast-growing China and other emerging markets compensated for wobbling sales in Europe and the United States.
But with China slowing, investors are now questioning how long and how well they will hold up.
Analysts said some brands were faring better than others with labels such as Prada, Bottega Veneta and Yves Saint Laurent performing well, with others such as Hugo Boss (BOSSn.DE) and Louis Vuitton starting to feel the pinch. ($1 = 6.3351 Chinese yuan)
(Reporting by Donny Kwok and Twinnie Siu; Editing by Muralikumar Anantharaman)