Luxury in China

Greater China’s Q3 retail recovery cushions global slump, Prada says

Prada’s fiscal 2016 revenue fell 9 per cent to 3.18 billion euros, cushioned by demand in Russia and Greater China

PUBLISHED : Monday, 13 February, 2017, 9:51pm
UPDATED : Monday, 13 February, 2017, 9:51pm

Prada SpA, the century-old Italian fashion house, has reported some early signs of a return in consumption during the second half of 2016, a recovery that cushioned the decline in its preliminary sales data for the last fiscal year.

Sales of the Milan-based company fell 9 per cent to 3.18 billion euros (HK$26.26 billion) in constant exchange rate during the financial year ended January 31, Prada said in a statement to the Hong Kong Stock Exchange, where its shares are listed. Measured in current exchange rates, revenue fell 10 per cent, the company said, citing preliminary data.

Like Burberry, LVMH and other European retailers of luxury wear and designer bags, Prada is reporting that Chinese shoppers are returning to their physical and online stores, helping them claw their way out of a two-year slump in demand. An aggressive push to reorientate merchandise to online stores, from high-cost outlets in malls and department stores, also paid off.

Prada has “identified important strategies to secure the group’s future growth,” the company’s chief executive Patrizio Bertelli said in a filing. “This included revising our digital strategy with the creation of a highly skilled team with professional experience from the digital technology and new media industries.”

Asia-Pacific sales fell 12 per cent in the second half at constant exchange rates, Prada said, noting that the region’s performance was “very dynamic.” The Greater China region reported higher sales in the last quarter of the year, Prada said. Mainland China was recovering, while sales declines in Hong Kong and Macau had been less severe than previously, Prada said

“The European market, down 5 per cent at constant exchange rates, was adversely affected for most of the year by the reduction of tourist flows, especially in Italy and France, although France showed clear signs of recovery in the fourth quarter, Prada said in its filing. “Particularly positive was the performance of Russia, with double-digit growth, and the U.K., which reversed the decline of the first six months to end the year with strong growth.”

The American market, 12 per cent down, was continuously affected by falling tourist flows, and generally soft spending pattens, it said.

Japan declined by 13 per cent after five years of consecutive growth, as a consequence of the reduced flow of tourists from China after the yen’s appreciation. The Middle East reported a decrease of 10 per cent, it added.

The group’s 620 directly operated stores produced revenues of 2.64 billion euro in 2016, a decline of 13 per cent at constant exchange rates and 14 per cent at current exchange rates.

Sales across the entire wholesale channel rose to 504 million euro, up by 14 per cent at constant exchange rates and 13 per cent at current exchange rates.

Licensed business grew by 3 per cent. Both eyewear and fragrances experienced positive trends, with royalties of 45 million euro, Prada said.