Asian sales a worry for luxury branch

Asian sales a worry for luxury branch

Several luxury companies have struggled lately to present positive results, despite the improved economic situation in Europe and the United States. Changed policies in Asia are the biggest problem area.

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.

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