Leather goods sales blamed for Prada’s poor performance

Italy
Published:  22 September, 2014

The Italian fashion house Prada has reported a drop in profit, hit by a fall in leather goods sales and currency fluctuations. First-half net profit fell 21% to €244.8 million, the company said.

Prada said the strength of the euro had hurt sales as well as a difficult economic environment. Prada shares fell 1.3% in Hong Kong, to their lowest level in more than two years.

Prada expects profits in the second half of the year to be broadly in line with the first half, however "margins will continue to be under pressure with some marginal improvements deriving from the costs-cutting actions," the company said in a statement.

Revenues from sales of leather goods, a category with a high profit margin, decreased by 1.4%, mainly because of a decrease in tourist numbers in the main shopping destinations in Europe and Asia, Prada said.

Sales in shoes and ready-to-wear clothes rose, as did menswear, which saw sales rise 19% in the first half of the year.

One luxury goods analyst said they thought the re-positioning of Prada itself as a higher end brand was a good thing, because it helped to protect the brand.

There has been concern about the strength of demand in China throughout the luxury goods industry. The Chinese market has slowed and Chinese consumers usually spend most of their money abroad, but that trend is gradually shifting. So far the spending at home has not made up for the spending abroad. The clampdown on corruption in China has also had an effect on the overall sales of luxury goods.

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