MILAN, Italy – Italian fashion brand Prada revealed tumbling first half profit as weak demand from tourists hit growth.
Prada said first half net profit fell 20.6 percent to €244.8m and said while sales of clothes and shoes did well, leather goods like handbags were down 4.9 percent at current exchange rates due to a “decrease in tourist footfall in the main shopping destinations in Europe and Asia”.
Earlier this week the tax refund specialist Global Blue found tourist spend in Europe was down 2.5 percent year on year for July and August and experts have blamed the slowdown on unrest in Russia and Ukraine, the strong pound and euro, political instability in Hong Kong and wider geo-political concerns.
Prada’s second-quarter net profit of €139.5m was below analyst forecasts. The group had already revealed a slowdown in first half sales growth last month. Sales totalled €1.75bn for the six months to end of July, a 1.3 percent increase on the first half of last year.
Patrizio Bertelli, chief executive officer of the group that also owns Miu Miu and Church’s footwear, said: “Despite the current scenario is not showing signs of improvement and the difficult economic and geopolitical conditions are negatively influencing consumers attitude, we remain confident that the luxury goods market – especially the high-end segment where the Prada operates with success – will continue to offer interesting growth prospects in the medium-term.”
The group, which unveiled its Milan fashion show this week, has been cutting back on its wholesale customers to control who sells the brand to stop it becoming too common and lose its appeal among its core super-wealthy customers.
It said the “rationalization” is close to completion and wholesale sales grew by 1.3 percent to reach €288.7m. Its China business performed well and sales in the Americas were also positive but it suffered in Korea, Hong Kong and Singapore while its home market in Europe was also poor.
Prada is the latest luxury goods group to reveal problems relating to currency fluctuations and a slowdown in demand. Richemont, the Swiss giant behind Cartier watches, earlier this week revealed weak watch sales due to a crackdown on gift giving in China.