Prada on H1 Profit Drop: No Sign of Improvement

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Prada Spring '15

Prada Spring ’15

Milan–Prada has booked a drop in first-half earnings due to weakness in Europe, and said there are no signs of improvement in the short term.

Net profit in the six month period amounted to 244.8 million euros (about $314.7 million), a 21% drop on the prior year. Margins, the company said, were hit by “unfavorable” forex trends and by “broadly stable” revenues, which was insufficient to absorb an increase in costs due to retail network expansion.

Consolidated net revenues totaled 1.75 billion euros, a 1.3% increase on the prior year period.

Prada said it did not see significant improvements in the luxury market in the coming months and forecast a second half broadly in line with the first six months to end-July, without specifying if it was referring to sales or profit.

In April Prada said it expected to see growth in sales this year in the “high-single” digits.

“We will have net openings of 65 stores against 80 planned,” Chief Financial Officer Donatello Galli said in a conference call on the financial results.

In Asia Pacific, sales were down 2.1% at current exchange rates, with performance remaining particularly weak in Korea, Hong Kong and Singapore. The Americas market shows some positive signs, with sales up 8.2%. In Europe, however, weaker tourist flow and the negative general economic environment meant sales fell slightly at constant exchange rates, Prada said.

“Despite the difficult political and macroeconomic environment and unfavorable forex trends throughout the period, the Prada Group continued to prioritize long-term growth objectives with investment aimed at increasing brand value. At the same time, it sought to reduce short-term pressure on margins with measures to contain costs across the group,” said CEO Patrizio Bertelli.

“The position now reached by the group on the luxury goods market constitutes a solid base for medium-term growth of revenues and margins. We shall pursue such growth, paying ever greater attention to excellence, through a focused investment policy and the constant monitoring of costs.”

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