Prada Sees Lowest Profits in 5 Years

Handbags, wholesale and low spending in Asia are among Prada's many problems going into 2016.
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Prada fall 2016. Photo: Imaxtree

Prada fall 2016. Photo: Imaxtree

Prada ruined many of its investors' weekends on Friday afternoon, releasing its sales results for 2015 ahead of a more in-depth presentation on Monday morning. Following several periods of slowing growth, it saw sales decline 8 percent (at constant exchange rates), while profit declined 27 percent to 330.9 million euros ($377 million) — the group's lowest in five years. Stock prices had dropped 7.8 percent Monday morning.

Prada pointed to the same issue it's faced over the past couple of years: Asia, its largest market. With the exception of Japan, where just about every luxury brand is seeing consistent growth, Prada says it's been hurt by pricing differentials, Chinese stock market volatility and low foot traffic at stores in the region, all contributing to a 16 percent decline in sales. Growth was strongest in Europe, which saw a 5 percent revenue uptick.

Asia's not Prada's only problem, though. Sales of leather goods (i.e. handbags), the company's largest category, were down 10 percent. Handbag sales were especially low in Asia, and U.S. wholesale continued to be an issue, too: sales to third-party retailers were down 21 percent at constant exchange rates, while retail sales (those in Prada's own stores) were down 5 percent. As usual, sales at Prada (down 7 percent for the year) were slower than the group's other brands. Miu Miu saw a 1 percent increase while footwear brand Church's was up 7 percent.

So how will Prada ramp up business in 2016? Its results presentation pointed to a focus on customer experience and digital initiatives. It plans to build out its in-house e-commerce infrastructure, expanding into more countries and expanding the categories available online. "See now, buy now" will continue to be implemented in some capacity, as it was via two handbags at Prada's fall 2016 show. There will also be a big push for social media projects and other methods of "innovative communication." Hopefully that will be enough to turn things around in the months ahead.