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Weak sales in Asia impact Prada profits

By Prachi Singh

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Prada for the nine months ended October 31, 2015 reported consolidated net revenues of 2,582.5 million euros (2,824.2 million dollars), a 1.2 percent increase at current exchange rates on the corresponding period in 2014. Net Profit declined 26 percent to 235.1 million euros (257.2 million dollars).

”Over the last few months, we have seen a general worsening of the macroeconomic environment: in particular, continuing volatility on financial markets and rising fears on the social and political landscape have made consumers less willing to spend and decreased tourist flows in some countries. Against this background and also in light of the far-reaching changes underway in the luxury goods segment, we are further stepping up all our commercial and product-related initiatives to strengthen relations with our increasingly sophisticated and demanding customer base,” said Patrizio Bertelli, Chief Executive Officer of Prada Spa.

Retail performance by geographical area and brand

Wholesale channel sales for the period were down by 15.9 percent at current exchange rates. In contrast, the group’s retail network revenues were up by 3.8 percent and amounted to 2,253.5 million euros (2,465.1 million dollars). The licensing business (eyewear and fragrances) performed well. Royalties for the nine months increased 16.2 percent on the back of launch of the first Miu Miu fragrance.

The European market grew in the nine-month period at both current exchange rates with 8.6 percent and constant exchange rates with 7.6 percent. The company said it was boosted by the weakening of the euro which triggered a notable flow of Asian and American tourists. The Italian market continued to stand out among the various European countries and recorded growth rates well above the average for the area.

The Japanese market witnessed growth at both current exchange rates of 10.4 percent and 4.6 percent respectively, driven by the rising number of Chinese tourists. Meanwhile, the Asia Pacific market recorded a 4.9 percent decrease at current exchange rates due to reductions in both local consumption and tourist flows within the region, with Hong Kong and Macau particularly affected.

On the American market sales increased at current exchange rate by 8.5 percent, but showed a negative underlying trend with 7.6 percent decline at constant exchange rates. The significant strengthening of the US Dollar over the period had an adverse impact on tourism, mainly from China and South America, but, at the same time, it encouraged a shift in American consumer spending towards Europe.

Meanwhile, Miu Miu has grown with revenues up at both current exchange rates with 11.8 percent and constant exchange rates at 1.9 percent. Church’s has also achieved sales growth of 17.6 percent, a positive trend also on a like-for-like base. EBITDA for the first nine months amounted to 595.4 million euros (651.3 million dollars) or 23.1 percent of consolidated net revenues and EBIT totalled 373.9 million euros (409.1 million dollars) or 14.5 percent of consolidated net revenues. Net Profit was 235.1 million euros (257.2 million dollars) or 9.1percent of consolidated net revenues.

Prada