Prada’s FY15 profits struck by Asian slowdown

Luxury Italian conglomerate Prada SpA has seen its profits take a hit once more, as the slowdown in demand in Asia - particularly China - struck its profits for its fiscal year 2015. The group has reported its lowest profit in five years, as pressure on Chief Executive Officer Patrizio Bertelli to turnaround things for the company’s luxury fashion brans continues to mount.

Prada reported a 26.6 percent decline in total profits during the 12 months that ended January 31, 2016, down from 450.7 million euros (590.4 million US dollars) to 330.9 million euros (364 million US dollars) during the same period from the previous year. Consolidate net revenues for the fiscal year 2015 amounted to 3.54 billion euros (3.91 billion US dollars) in comparison to the 3.55 billion euros (4.67 million US dollars) achieved in the previous year. Wholesale revenues for 2015 came in at 444.6 million euros (506.6 million US dollars), down by 88 million euros or 16.5 percent compared to the same period a year ago.

Sales drop close to 27 percent for Prada during FY15

Sales of the group’s retail network grew by 79 million euros, or 2.6 percent, to 3.05 million euros. Although sales in Europe and Japan grew 5.9 percent and 10.7 percent respectively at current exchange rate for the year ended January 31, 2016, sales in Asia, Prada’s largest market, dropped 4.4 percent at current exchange rates as the company continues to struggle with the disappearing demand in China, the strong dollar as well as terror attacks in Europe. The Asia pacific area as a whole recorded a 16.1 percent revenue decrease at constant exchange rates.

Prada recorded net sales of 247.6 million euros, a 1 percent increase in FY15 whilst Miu Miu enjoyed a revenue increase of 1.3 percent at constant exchange rates as did Church’s, which saw a growth of 7.5 percent at constant exchange rates. Leather good sales, one area Prada has been highlighting recently by introducing the ’see-now, buy-now’ model for two of its AW16 bags, also reported a decline of nearly 10 percent at constant exchange rates. EBITDA amounted to 802.8 million euros for the year, 22.6 percent of consolidate net revenues, down from 26.9 percent in 2014. In addition, Prada’s inventory of finished products grew 7.6 percent to 614 million euros at the end of its fiscal year 2015.

Analysts previously estimated profits in the region of 348 million euros for the Italian fashion group for the year, as Prada’s profits missed analysts forecasts in 11 out of 12 previous quarters. Prada published its FY15 results on Friday, ahead of its presentation and conference call to discuss the results scheduled for Monday. Patrizio Bertelli, Chief Executive Officer of Prada Spa, commented: “Throughout 2015, the luxury goods market had to deal with an economic environment characterized by volatile financial markets and by heightening geopolitical tension in different regions across the world. These conditions are still present and 2016 is expected to be affected by instability which makes any short-term forecasts uncertain.”

“Bearing this in mind and in order to ensure the Group achieves satisfactory profit levels, we have recently implemented a thorough review of all operating processes. The results, in terms of greater efficiency and productivity, will be apparent in the months to come. We will pay particular attention to new forms and methods of communication designed to develop a relationship between our brands and an ever larger audience, based on a permanent dialogue embracing the various parts of the Prada universe."

"At the same time, we will continue to pave the way for the sustainable long-term growth of the Group with investments aimed at enhancing the distinctive features that make our brands unique: excellent product quality with contemporary and innovative design and capacity to interpret the desires of our ever more sophisticated and demanding customers.”