Prada CEO Under Pressure as Profit Falls to Five-Year Low

Updated on
  • Italian fashion company says short-term forecast uncertain
  • Profit missed analysts' estimates in 11 of past 12 quarters

Prada SpA reported its lowest profit in five years on ebbing demand in Asia and said it’s impossible to make any forecast this year, increasing the pressure on Chief Executive Officer Patrizio Bertelli to revive the Italian fashion company’s brands.

Net income fell 27 percent to 330.9 million euros ($376 million) in the year through January, the maker of Miu Miu handbags and Church’s shoes said Friday in a statement. Analysts had estimated 348 million euros. Profit has missed forecasts in 11 of the past 12 quarters.

“What they have to do is basically relaunch the Prada brand,” said Mario Ortelli, an analyst at Sanford C. Bernstein.

Prada has become the poster child for the luxury sector’s woes. Sales fell 16 percent in Asia, its largest market, excluding currency swings. Prada has been hurt by collapsing demand in China, the strong dollar and terror attacks in Europe. Its chief financial officer quit in February after more than a decade at the company. The shares have fallen more than 40 percent in the past year and at HK$25.65 are below their 2011 initial public offering price of HK$39.50.

Prada Needs Prodding

Not all fashion brands are suffering. Gianni Versace SpA has reported a 20 percent surge in earnings for last year and Chief Executive Officer Gian Giacomo Ferraris said last month that he’s cautiously optimistic for this year.

Prada’s inventory of finished products rose 7.6 percent to 614 million euros at the end of 2015. Sales growth hasn’t kept up as Prada has been adding more stores, eroding profitability as rent and personnel costs increase. Sales of leather goods declined almost 10 percent at constant exchange rates.

Prada will host a conference call from New York on Monday.