Prada Revenue Growth Evaporates as Luxury-Goods Maker Struggles

  • Dollar strength weighs on sales to tourists in the U.S.
  • Chinese market improving, though still negative, company says

Prada SpA’s sales were little changed for a second year running as the dollar’s strength weighed on tourist demand for $3,000 handbags in the U.S.

Revenue was 3.55 billion euros ($3.96 billion) in 2015, the Milan-based owner of brands including Miu Miu and Car Shoe said Wednesday. The average of analysts’ estimates was 3.56 billion euros. Sales in the American market fell 9 percent on a basis that excludes currency fluctuations, Prada said.

The luxury-goods maker had to contend with “extreme volatility” in currency markets, and “a deteriorating geopolitical situation in many world regions,” Chief Executive Officer Patrizio Bertelli said in a statement. “These two factors have made prices fluctuate wildly and diverted tourist traffic in sudden and unpredictable ways.”

Collapsing demand in China, the strong dollar and the Paris terror attacks made 2015 a year to forget for the luxury-goods industry and for Prada more than most. The company’s products have lost their sheen and less than 1 percent of revenue is generated online, where luxury sales are growing at more than twice the pace of the overall market. Prada’s performance contrasts with a 4 percent increase in fashion and leather-goods sales at LVMH.

Fewer Openings

“Prada continues to struggle following years of overexpansion in retail and high exposure to Asia,” Zuzanna Pusz, an analyst at Berenberg, said in a note.

The Italian company, whose revenue fell 1 percent in 2014, has responded by dialing back store openings and slashing costs, and pledged to increase prices in Europe. These and new commercial and marketing initiatives “will enable us to consolidate our market position with satisfactory margins and returns on investment,” Prada said.

While the company didn’t provide a quarterly breakdown, 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, the company said.

The sales were released after the close of trading in Hong Kong, where Prada shares rose 1.3 percent to HK$24.20.

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