Prada First Half Sales Slow as Leathergoods Sales Weaken

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Fall ad campaign at Prada

Fall ad campaign at Prada

Milan—After years of reporting stellar sales increases, Prada SpA today reported that sales in its first half slowed from previous years.

For the six month ended July 31, the Hong Kong-listed luxury house said Wednesday that its half year sales rose a mere 1% to 1.75 billion euros (about $2.34 billion). Sales in the first half of 2013 grew 12% compared with the same period a year earlier and were 36% higher in the first half of 2012 compared with the same period of 2011.

The stall in growth confirms fears of upcoming weakness for the brand, which analysts raised when the company reported its first-quarter earnings in June. At that time, Prada said that its first quarter net profits dropped almost 24% compared with the same period in 2013 and revenues were down 0.6%.

5th Straight Decline

“The group has operated in a more difficult political and macroeconomic environment than expected with unfavorable exchange rates and a general fall in consumption,” Prada CEO Patrizio Bertelli said in the statement. The company will implement “rigorous” cost controls to protect its margins, he said.

While sales of its main staples, handbags and leathergoods, have been the driving force behind previous increases, Prada said Wednesday that lower tourist flows are pressuring its leathergoods sales. Handbags are among the top picks among tourist shoppers, the company said in a statement. As a result, sales for the category were down 5% compared with the first half of 2013, down 1% at constant rates.

Hong Kong retail sales was down 6.9% year-on-year, the fifth straight decline. Sales of watches, jewelry and high-end products plunged 28.2%, probably reflecting anti-extravagance measures and slower economic growth in mainland China.

Sales in Asia have been poor as well. Asian-Pacific saw the steepest decline in sales in the first half of the year, posting a 2% fall. The company’s performance was particularly weak in Singapore, Korea and Hong Kong. Prada said that it saw an improvement in China, which grew 12% at constant rates.

Sales in Europe were stagnant, too, owing to the economic environment and a lower number of tourists. The Middle East was the fastest-growing area for the company, with sales up 16% compared with the previous year. Sales in Japan and the Americas were up 10% and 8% respectively.

Sales at the company’s wholesale channel were up 1%, signaling a strong recovery in the second quarter compared with a 25% fall seen in the previous quarter.

President Carlo Mazzi said in June that the first quarter was “a transition” but orders were expected to pick up. Bertelli said  that the company will update the market on its full-year guidance and will continue to control costs to protect margins.


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