Fashion label Prada's profit dropped a quarter

Italian fashion label Prada‘s net profit has dropped to its lowest point in five years as lower sales meant that Prada now has 7.6 % more stock while the costs for employees and rent grow as part of its increased store network.

Rising costs

Prada, which also has Miu Miu (bags) and Church’s (shoes), announced mid-February that turnover in its broken fiscal year (until the end of January) would be down slightly, from 3.55 to 3.54 billion euro. On top of that comes the publlication of the the annual results, which show that the group’s net profit plummeted 27 % to 330.9 million euro, Prada’s lowest net profit in the last 5 years. Analysts had forecast 348 million euro, meaning that over the past 12 quarters, Prada only managed to beat analysts’ expectations just once.

Prada is particularly struggling to sell its expensive bags, shoes and other luxury items in China. The weaker local economy and the government’s fight against corruption have really hit Prada’s sales. Asia Pacific is Prada’s most important market, with a third of the total group turnover, but sales there have slumped 16 %. The expensive dollar has also hindered Prada, while the terror threat kept rich tourists out of Europe, something every other luxury concern has had to deal with too.

These geopolitical circumstances will still be present in Prada’s current fiscal year, which has prompted the company not to give an actual forecast. Over the past year, Prada’s share dropped an astonishing 42 %.