Prada 2014 Profit Drops by Nearly 30% on Weaker Sales

In What's New, Industry News by Jeff Prine

The third chapter of Prada The Iconoclasts was inaugurated during Paris Fashion Week at Prada Faubourg Saint-Honoré store. "Worldwide known costume designer Milena Canonero, four times Oscar winner - reinterpreted the visual identity of the store through the Feng Shui philosophy"

The third chapter of Prada The Iconoclasts was inaugurated during Paris Fashion Week at Prada Faubourg Saint-Honoré store. “Worldwide known costume designer Milena Canonero, four times Oscar winner – reinterpreted the visual identity of the store through the Feng Shui philosophy”

Milan—Stung by weaker sales in Asia, Prada today reported its net profit dropped 28% last year.

As has been reported by other publicly traded luxurygoods brands, Prada saw its sales impacted by the pro-democracy protests in Hong Kong that kept tourists and big spenders away.

While global sales were down only 1% to 3.552 billion euros, net profit for the year ended Jan. 31 was down to 451 million euros (about $488 million). Analysts had expected a net 476 million for the year.

Smaller sales of leathergoods hurt margins as core profit fell to 954 million euros, or 27% of net sales, from 32% a year before.

Lower Bag Retails

Prada will also try to leverage its best-selling models, frequently introducing new versions and launching new styles covering all strategic price ranges, including new bags starting at between 700 and 800 euros. By comparison Prada’s most successful bags include the Galleria starting at 1,400 euros and the Double Bag at 1,800.

Prada is also working on its supply chain and looking to hire 300 people in Tuscany where it produces leathergoods.

Good performances in Japan, the Middle East and the Americas were offset by a 5.5% fall in sales in the Asia-Pacific region excluding Japan.

European sales contracted 1.1%, hit by lower numbers of Chinese and other tourists and by weak domestic demand. Japanese and Americas markets both registered 7.7% sales increases and there was an advance to just fewer than 10% in the Middle East.

“Through the year we operated under a geopolitical and monetary environment which was more uncertain and complex than could have been envisaged,” said CEO Patrizio Bertelli.  “This situation has temporarily held up the group’s path of growth but it will not affect our medium/long-term growth objectives.”

Bertelli  called 2014 a transitional year with the company expanding its network of Prada, Miu Miu and Church’s Shoes stores by 54 units.

“Our balance sheet and the operating cash flow generation remain strong and enable us to confirm our investment plans in production and research, while also optimizing the retail network,” he said.

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