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Prada FY15 sales dented by Chinese weaker appetite for luxury and strong dollar

By Angela Gonzalez-Rodriguez

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Business

Prada hasn´t been immune to the loss of appetite for luxury goods in China. The Italian luxury fashion house has seen consolidated net revenue fell 0.2 percent over the past twelve months to 3.54 billion euros. A strong dollar hasn´t helped either, affecting international sales.

Patrizio Bertelli, Chief Executive Officer of Prada Spa, recognised that the company has fought against an adverse market, saying that “Throughout 2015, we had to deal with an economic environment characterised by extreme volatility in currency markets.”

Lower demand in China and a strong dollar burden Prada’s FY16 preliminary results

Lower-than-ever demand in China – to date the biggest market for high-end brands -, a strong dollar and the unrest brought by terrorist attacks in Paris to the European markets have taken their toll on Prada’s FY16 preliminary results.

“These two factors have made prices fluctuate widely and diverted tourist traffic in sudden and unpredictable ways. Our retail network –now truly global thanks to investment in recent years – enables us to keep developing a direct relationship with our ever more demanding customer all over the world,” summed up Bertelli in a note on Wednesday.

On the latter, Prada still needs to convince Zuzanna Pusz, an analyst at Berenberg, who said in a note to investors that “Prada continues to struggle following years of over expansion in retail and high exposure to Asia.”

Within this context, revenue at Prada came in at 3.55 billion euros, slightly behind the average of analysts’ estimates of 3.56 billion euros, highlights Reuters.

Despite the lack of broken down figures, Prada assured that the performance in Italy was positive in the final three months of the fiscal year and there was some improvement in China, which remains negative.

Meanwhile, sales in the American market fell 9 percent on a basis that excludes currency fluctuations, the company said, further adding that “thanks to favourable exchange rates, sales on the American market grew by 5 percent: in real terms, there was a 9 percent decrease largely because of the significant strengthening of the US Dollar which affected the inflow of tourists to the area.”

Prada finds some comfort in Europe and the Middle East

Positive figures came from Europe and the Middle East. While in the Old Continent the Italian group recorded healthy sales growth of 6 percent at current exchange rates and 5 percent at constant exchange rate; the Middle East enjoyed a “good fourth quarter meant the financial year ended with 11 percent growth at current exchange rates, while limiting the decrease at constant exchange rates to 5 percent.”

Last but not least, the “continuing upward trend in the Japanese market – unbroken now since 2010” – saw growth of 11 percent for the full year at current exchange rates, or 4 percent at constant rates.

It’s worth recalling that Prada's shares have dropped 44 percent over the past year, under performing the benchmark Hang Seng Index which has fallen 19 percent in the same period, according to data gathered by Bloomberg.

“In the coming months, the Prada Group will be focusing its energies on the development of new commercial and marketing initiatives to sustain organic growth, also by means of an extensive digital project to strengthen dialogue with our customers. These actions, taken against the background of rigorous and disciplined cost control, will enable us to consolidate our market position with satisfactory margins and returns on investment,” advanced the company’s CEO.

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