September 22, 2014 / 4:06 AM / 5 years ago

Prada shares plummet as China slowdown hits luxury brands

The Prada logo is pictured during the showcase of the Autumn/Winter 2014 collection at Milan Fashion Week February 20, 2014. REUTERS/Alessandro Bianchi

HONG KONG (Reuters) - Shares of Prada SpA (1913.HK) fell nearly 5 percent to their lowest in 26 months on Monday as the company became the latest luxury goods maker to be hit by a slowdown in China.

The Italian company, known for its expensive handbags and Miu Miu brand dresses, said last week that it had been hurt by sluggish consumer demand and an uncertain economic outlook.

Prada is “reconfirming a pessimistic outlook for the global luxury sector, led by a slowdown in China,” said Alex Wong, a fund manager at Hong Kong-based Ample Finance Group.

Prada last week said its first-half profit had slipped by more than a fifth. It said it would open fewer stores than initially planned and that this year’s revenue would likely be flat.

Bocom International and Barclays cut their price targets on Prada stock on Monday.

Other luxury goods makers are also struggling. Gucci, whose handbags rival Prada’s, reported a second-quarter sales drop of 2.4 percent in July. Gucci’s parent company Kering SA (PRTP.PA) said that while business in China’s major cities had improved since last year, trends in the country remained negative. It also said that Chinese tourists in Europe were spending less.

LVMH (LVMH.PA), French fashion, spirits and cosmetics giant, said in July that demand from Chinese buyers at home and abroad had fallen and that sales in Hong Kong had dropped off amid pro-democracy protests.

LVMH’s second-quarter sales growth of 3 percent was about half of what analysts had predicted.

Reporting by Clare Baldwin, Donny Kwok and Grace Li; Editing by Gopakumar Warrier

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