Prada will open more stores to counter slower growth

Prada will open more stores to counter slower growth

2013 was not as good as Italian luxury group Prada had hoped, despite an 8.8 % turnover increase to 3.59 billion euro, as turnover growth is slowing down and net profit halted at 627.8 million euro, well below analysts' expectations.

Luxury market under pressure

The company immediately sent out a warning that growth would slow down even more, as European demand remains weak, the Chinese market has basically "matured" and the strong euro hampers export. The Italians expect like-for-like turnover growth to be lower than the 7 % it managed last year, warning for a "single-digit growth" for 2014.

 

That means Prada cannot escape the slump the luxury market currently is in, with a mere 2 % turnover growth last year - the lowest growth in 4 years (up to 217 billion euro), says consultant Bain & Co. Prada however stands by the more optimistic research firm Altagamma, which has calculated that the market would grow 3 to 5 % up until 2016, crossing the 250 billion euro turnover landmark.

 

Stronger focus on men

To counter this slower growth, Prada will fully focus on expansion, with 120 new Prada stores by 2016. Fifty new stores will be fully focused on men, on top of the 30 men's stores it currently has. The fashion concern believes it can manage a "strong growth" in this particular branch in the medium term.

 

Prada's women's fashion and accessories brand Miu Miu will get another 70 stores by 2016, with its own perfume in the second part of 2015. Total Miu Miu turnover for 2016 should reach 800 million euro. Prada will also invest in its British shoe brand Church's, which is currently developing a ready-to-wear clothing and accessory collection with the aim to get a 250 million euro turnover in five years' time.

 

By the end of 2015, Prada will have another 4 production facilities in Italy, on top of the 11 it already has in Italy and Great Britain), which means another 700 people will get employment. It may also make several acquisitions, to increase its manufacturing capacity.

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