Prada Warns Turnaround to Take Longer Than ExpectedBy
Fashion brand’s first-half earnings miss analysts’ estimates
Prada closed another 13 stores in period amid online push
Prada SpA warned that its turnaround plan may take longer than expected as the Italian maker of $2,200 leather totes and $495 Velcro sandals struggles to keep up with rivals’ online expansion and stem a decline in sales.
First-half revenue dropped 5.7 percent as the strong euro cut into tourist spending in Europe in recent months, Milan-based Prada said Friday. In New York, sales from a store on Fifth Avenue have been disrupted by demonstrators against President Donald Trump, Chief Executive Officer Patrizio Bertelli said on a call with analysts.
The maker of Miu Miu pumps and Church’s dress shoes embarked on a wave of store closures in 2016 and has been trying to push e-commerce to gain more clients after profit fell to a five-year low. Prada was hit harder than most by a downturn in demand across Asia, where it gets about half its revenue. The company shuttered 13 stores in the first half, and opened six.
Prada’s new e-commerce site has gone live in the U.S. and Europe, and the company plans to introduce it in other key markets including China by the end of 2017. Prada is also using social media to try to reach more consumers directly, and Bertelli said those moves should result in some improvement in the second half.
“Prada’s DNA is about products that are really breakthrough, that can surprise and even disrupt markets,” the CEO said on a call with analysts. “We need to complement that with new communication policies.”
Net income fell 18 percent to 115.7 million euros ($140 million) in the six months through July, missing analyst estimates.
Shares of the Hong Kong-traded Italian fashion house gained 6.3 percent this year, trailing behind a 50 percent increase in Kering and a 21 percent gain in LVMH. Prada reported its results after the close of trading.
In a call with analysts, Bertelli insisted that no change of creative direction is needed at the brand, which has been designed by Miuccia Prada since 1978. He said new designers often have short-lived tenures, while Chanel has had success by keeping the 83-year-old designer Karl Lagerfeld in place for more than 30 years.
Among other highlights:
- Co. to introduce more sneakers in October to help stem losses in footwear as consumers move away from dressier models
- Prada said it will shift to reporting earnings for each calendar year