HK, Macau drag down Prada profits

Difficult times on Asian markets, especially in Hong Kong and Macau with lower local demand and fewer tourists, have impacted Prada profits.

“At the same time, social and political tensions worldwide further contributed to a general decrease in willingness to consume and in tourist flows,” the Milan-based group says in its annual results.

The company plans to offset new shop openings with selective closures this year and next in an effort to shield profit margins from weaker demand, according to Business Insider.
Prada profits fell by a larger-than-expected 28 per cent in the 12 months to January 31 – to 14 per cent of revenue, down from 20 per cent the previous year.

After listing on the Hong Kong bourse in 2011, the group expanded its retail outlets in the territory. Now it has been hit by China’s economic slowdown as well as a crackdown on extravagant gift-giving. Similarly affected, luxury goods industry leader LVMH has just posted first-quarter sales below forecasts.

CFO Alessandra Cozzani, who took over the role in February after the sudden resignation of Donatello Galli, says Prada will balance new openings with closures and work to keep operating expenses flat.

“The retail network will remain the same for sure in 2016 and probably also 2017. We’re working on increasing the productivity of stores.”

Prada’s directly operated stores (DOS) increased from 594 to 618 in the 12 months to January 31.

Head of strategic marketing Stefano Cantino says the group will bet on eCommerce with the aim of doubling revenues over the next two years. It will start working with partners such as Yoox Net-A-Porter to sell its products on multi-brand e-shops.

Digital and marketing initiatives will also be used to strengthen relationships with clients.
Meanwhile, the Asia Pacific is still the group’s leading market, generating new sales of €1080 million (US$1.23 billion) during the year. However, net sales fell by 4.4 per cent at current exchange rates and by 16.1 per cent at constant exchange rates.

In Japan, where there was a strong flow of tourists, the brand ended the year with net sales of €403.7 million, a 10.7 per cent increase.


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