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Saturday, June 13, 2015

Prada's Profits Continue to Tumble

Prada's Profits Continue to Tumble:

Miu Miu's fall 2015 runway show. Photo: Imaxtree
Miu Miu's fall 2015 runway show. Photo: Imaxtree
As we learned back in March, Prada didn't have a great 2014. Net sales for last year dipped 1 percent, while profits were down 28 percent. Now, the first set of results for 2015 are in, and, at least profit-wise, things aren't looking much better.

For the three months ended April 30, the company's profits fell 44 percent due largely to "the continuing difficult market conditions in the Asia Pacific area, especially in Hong Kong and Macau," according to CEO Patrizio Bertelli. Chinese tourists still aren't showing up and shopping luxury brands the way they used to. It's a problem that isn't unique to Prada, as Kering recently reported that poor performance in the Asia-Pacific region contributed to Gucci's 8 percent sales decline in the first quarter. That said, Asia does comprise the largest geographic chunk of Prada's sales, so slipping up there does a lot of damage to its sales overall.

However, sales picked up a bit in Europe, Japan, the Americas and the Middle East, which saw growth of 11 percent, 6 percent, 16 percent and 13 percent, respectively. Thanks to those regions and the strengthening of other major currencies against the Euro, overall revenue for the Group was up 6.5 percent.

Brand-wise, Miu Miu outperformed most of the Group's other labels. Revenue for Prada's younger sister grew 19 percent, while Prada only grew 5 percent. Church’s and Car Shoe recorded sales growth of 16% and 20%, respectively.

Bertelli says the company is focused on making its operations more efficient (which should help with profit margins), revising its organizational structure and producing innovative products. Hopefully that means 2015 will be better than 2014 was.

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