Milan: A slowdown in the Chinese market pushed Prada’s profits sharply lower last year, the Italian luxury company said yesterday.
Net profit dropped nearly 27 per cent to just under 331 million euros ($378m) in the 12 months to end-January, Prada’s financial year.
Group sales stagnated at 3.5 billion euros, while the contribution from Asia dropped because of Chinese weakness, Prada said.
“The economic situation on the Chinese market remains negative,” it said, leading to a 4.4pc drop in sales from the Asia-Pacific region. Stripping out the impact of a strong dollar last year the drop was even higher, at more than 16pc.
A weaker euro, meanwhile, helped European sales as Asian and American visitors got a better exchange rate, and turnover in Japan also rose, helped in part by Chinese tourists buying Prada products in Japan.
Revenues in the US rose, but only thanks to dollar strength.
Prada said the drop in the group’s bottom line was a result of costs related to its retail network expansion which were not offset by any sales growth.
Prada’s net profit margin fell to 9.3pc of sales from 12.7pc a year earlier.
It added, however, that its cost-cutting drive was beginning to bear fruit.
Prada held its dividend at 11 euros per share and said that the earnings outlook was clouded by economic uncertainty.
“Throughout 2015, the luxury goods market had to deal with an economic environment characterised by volatile financial markets and by heightening geopolitical tension in different regions across the world,” Prada chief executive Patrizio Bertelli said.
“These conditions are still present and 2016 is expected to be affected by instability which makes any short-term forecasts uncertain,” he added.
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