Prada’s sales were are cooling off because of the strong value of euro hitting the purses of tourists visiting Europe and shopping for luxury goods. The Italy-based, Hong Kong-listed luxury house says net profit slumped 18.4 per cent to €115.7 million at the firm that also includes the Miu Miu, Church's and Car Shoe brands. And overall net sales slid 5.7 per cent on a constant exchange rate basis in the six months to the end of July to €1.47 billion ($1.77 billion). It had not been able to generate the kind of growth in other global markets that its rivals have enjoyed. The reason could be that the product just isn’t the must-have it once was.
On a constant exchange rate basis sales in Europe fell by 7.7 per cent, with only its clothing lines bucking the downward trend, which is a problem as margins are higher for bags and shoes.
China was the only area to post growth as it is an important country for the firm. China’s crackdown on corruption and too-conspicuous consumption had hit luxury sales for many brands in recent years. But while Prada’s rivals got back on the recovery trail, the Italian influencer continued to struggle, so any positive news on its China ops is to be welcomed.
It all led CEO to the company investing heavily (over €105 million) in stores and e-tail to improve performance. Whether the company can drive sales of higher margin products sufficiently to boost profits remains to be seen. The firm’s turnaround could take longer than expected after earlier declaring 2017 to be the year when the turnaround would come to fruition.
