Prada seller tempers outlook as luxury floods in

Bloomberg

The largest Philippine seller of luxury brands such as Jimmy Choo shoes and Prada handbags says investors and analysts should temper earnings expectations, with competition among retailers squeezing margins – even as consumer spending shows no signs of letting up.
Intensifying competition for consumers will cap sales growth, SSI Group Inc. President Anthony Huang said in an interview. Profit estimates by analysts are “too rosy” while revenue forecasts are “a little bit optimistic,” he said.
Mid-range and luxury brands are rushing into the Philippines, cashing in on some of Southeast Asia’s most bullish consumers. Cushman & Wakefield Inc. estimates that more than 190 such brands have entered the country since 2008. Filipinos are the second most confident consumers in the world, just behind Indians, Nielsen Holdings Plc said in its latest Global Consumer Confidence Index report.
“The market has turned extremely competitive,” Huang said from his office in Manila’s Makati district. “Over the past years, there’s a huge influx of brands. Consumer spending is growing but that is also going to other things. Retail will still grow but it won’t be as fast as in the past.”
Manila-based SSI posted its first profit decline in five years in 2015 amid rising competition and the need to match price discounts of rival brands, including Hennes & Mauritz AB’s H&M and Fast Retailing Co.’s Uniqlo clothing chain. Net income fell almost a fifth even as sales posted a record. Last year’s profit margin shrank to 53.5 percent from 56.1 percent the previous year, Huang said.
SSI’s adjusted net income may reach 1.11 billion pesos ($24 million) this year and rise to 1.41 billion pesos in 2017, while sales will increase from 19.4 billion pesos to 21.7 billion pesos over the period, according to the average of analysts’ projections compiled by Bloomberg.
Since SSI’s November 2014 debut at 7.50 pesos, the stock have dropped 51 percent through Friday, compared with the 1.2 percent rise in the Philippine Stock Exchange Index. The shares fell as much as 4.6 percent to 3.52 pesos Monday to the lowest intraday level in a week.