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In the first half of 2016, Italian fashion label Prada‘s turnover dropped a lot, also the first time since its IPO in 2011 that there was a drop in the first half of a fiscal year compared to the year before.
Only progress in United Kingdom
Prada’s turnover dropped 14.8 % in the first 6 months of 2016, down to 1.55 billion euro, while net profit suffered even more, a 24 % drop to 141.9 million euro. Every region had setbacks, except for the United Kingdom. A difficult market in Hong Kong resulted in a 22 % turnover drop for the Far East, the largest setback of any region. Terrorist attacks had their impact on European tourism, with a 20 % turnover drop as a consequence, although the weaker pound in the wake of the Brexit helped boost turnover in the United Kingdom.
The company will need to refocus if it wants to reignite sales: it will lower hand bag prices and turn its attention to cheaper bags, with prices below 2,000 euro.
More focus on eCommerce
Not only will Prada spend less on advertisements, it also wants to increase its focus on online sales. It already has a web shop, but has barely given it any attention for quite some time, a strategy that will now change as it will also start selling Prada items on other shops, like Net-a-Porter. The goal is to double its online sales every year for the next three years, which in turn should help increase the 2 % turnover share online sales currently contributes to the company’s total turnover.
The fashion brand will also restructure its store network: stores in less desirable locations will be closed, while others will be remodeled and improved. This range of changes should help Prada grow again this year.
