China sinks Prada profit

Luxury retailer Prada Group has blamed China for a 28 per cent slump in profit last year.

The Italian company says sales in its key Asia-Pacific market – which contributes 35.7 per cent of its global turnover – slid 3.1 per cent.

This was largely due to the clampdown in corporate gift giving as China tries to reduce graft, and changing purchasing patterns in Hong Kong, which cashed up Chinese are spurning for other travel destinations.

“Results in the region were hit by the negative performances recorded in Hong Kong and Macau. The Greater China area still benefited from growth on the [mainland] Chinese domestic market and ended the year with net sales of 774.1 million euros, a decrease of 6.3 per cent,” the company said.

While Prada accounts for 81.2 per cent of the group’s sales, Miu Miu and Church’s both improved globally, while the smallest, Car Shoe, returned a sales drop of 11.9 per cent.

Prada opened 21 new stores in Asia Pacific in the year to January 31 and closed three. Retail sales slid 5.5 per cent, but this was in part compensated for by a double digit growth in the wholesale division, largely due to increasing numbers of inbound tourists into South Korea. In the Americas, sales were up 0.9 per cent.

In Europe, sales fell 4.9 per cent, but in Japan (which is not included in the Asia-Pacific figures) sales rose 7.9 per cent, despite store network rationalisation.   Prada said overall revenue for the year dipped by one per cent to 3.55 billion euros, while net income dropped to 450.7 million euros from 627.8 million euros a year earlier. Its operating margin was down from 31.9 per cent to 26.9 per cent, largely due to store openings.