Asian sales a worry for luxury branch

Prada turns down store openings

Prada is the biggest casualty, with a 28 % profit drop in the past fiscal year. The group’s net profit reached 451 million euro, which is below analysts’ forecasts. Total turnover dropped 1 % to 3.55 billion euro. To get those results back up, the company will evaluate its production processes and open fewer stores this year – from 54 stores last year to only 30 in 2015.

Prada is not the only company suffering however: French luxury group Kering only managed a small turnover growth in the past fiscal year (+ 1.1 %), despite a good performance by most of its brands. Gucci however had to deal with a 1.1 % turnover drop to 3.5 billion euro, something Kering hopes to remedy by giving Gucci a more modern brand identity.

That other major French luxury group, LVMH, also saw its growth slow down compared to the past several years. Back then, growth was well above 10 %, but it failed to keep up that pace over the past two years. Turnover growth halved in 2014, dropping to 6 %.

Disappointing Asian sales are the main reason why the luxury branch is experiencing growth that is lower – if at all positive. Several corruption cases have seriously lowered luxury products’ local appeal. Companies that invested a lot in Asia, like Prada, are now paying the price.