Prada sales slip 10 per cent to US$3.3 billion
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Sales for luxury group Prada slipped 10.4 per cent for its fiscal year to January 31 to reach €3.1 billion (US$3.3 billion).
The result is disappointing coming just 24 hours after LVMH reported a 15 per cent increase in sales across its multitude of brands in the latest quarter, albeit that Prada’s figures are for a full year.
Royalties rose by 3.1 per cent to €44.8 million compared with the previous 12 months, and pre-tax earnings reached €431.2 million, or 13.5 per cent on net revenues. The group’s net income was €278.3 million.
Prada says it was a challenging 12 months as it made concrete plans for brand development and launched an overhaul of its main processes. This transition phase coincides with the completion of a long-term plan for geographical expansion of its retail network and a bid to achieve an innovative form of integration with the digital universe.
“The business climate was mired in uncertainty because of ongoing geopolitical tensions of
global impact, as well as new events that have suddenly changed economic balances around the world,” says the Hong Kong-listed group.
Meanwhile, stabilisation of some currency trends paved the way for a recovery in domestic consumption, as in China and Russia, although growth in these markets has not yet compensated for the drop in cross-border tourism.
New designs
“Prada says it was a challenging 12 months as it made concrete plans for brand development and launched an overhaul of its main processes.”
Against this backdrop, the group says it took the initiative on several fronts, starting as always from the development of innovative products. Items were designed for Prada and Miu Miu in every category, particularly leather goods, including iconic handbags and special editions.
The group also focussed on store renovation with a massive restyling program to create more intimate, exclusive environments, updated to meet new aesthetic guidelines for Prada and Miu Miu.
During the year the group also made industrial changes under a three-year plan adopted in 2015, which aims to strengthen control over the production process by insourcing “some of the most delicate phases”. These investments are aimed to help preserve the craftsmanship at the heart of the group’s business model, while underscoring its ties to the Italian community and the sustainability of its manufacturing cycle.
Based in Milan, Prada works with the Prada, Miu Miu, Church’s and Car Shoe brands in the design, production and distribution of luxury handbags, leather goods, footwear, apparel and accessories. The group also works in the eyewear and fragrance industries under specific licensing agreements. Its products are sold in 70 countries through a network including 620 directly run stores and select luxury department stores, independent retailers and franchise stores.
Questions & Answers
Q.What reasons did Prada give for its sales decline?
What reasons did Prada give for its sales decline?
Prada stated it was a challenging 12 months, citing uncertainty from geopolitical tensions and new events changing economic balances globally. They also mentioned a transition phase due to brand development and process overhaul plans.
Q.How did Prada's performance compare to other luxury brands?
How did Prada's performance compare to other luxury brands?
Prada's 10.4 per cent sales slip contrasts with LVMH's reported 15 per cent increase in sales for its latest quarter. However, Prada's figures cover a full year, while LVMH's are for a quarter.
Q.What strategic initiatives did Prada undertake during this period?
What strategic initiatives did Prada undertake during this period?
The group focused on developing innovative products, especially leather goods, for Prada and Miu Miu. They also implemented a massive restyling program for stores and made industrial changes to strengthen production control.
Q.What was Prada's net income for the fiscal year?
What was Prada's net income for the fiscal year?
Prada's net income for the fiscal year to January 31 was €278.3 million. Pre-tax earnings reached €431.2 million, representing 13.5 per cent on net revenues.
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