Prada SpA reported first-quarter profit that trailed analysts’ estimates as the maker of USD695 clogs and $860 wallets struggled to reverse slumping sales in China.
Net income in the three months through April fell to 58.7 million euros ($65.7 million) from 105.3 million euros, Milan-based Prada said Friday in a statement. Analysts predicted 85.2 million euros, based on the average of eight estimates compiled by Bloomberg.
Prada is opening fewer stores, shuttering some wholesale accounts and introducing more bags priced between 1,000 euros and 1,200 euros as it attempts to reignite demand amid a clampdown on corruption and extravagance in China. First-quarter revenue rose 6.5 percent to 828.2 million euros as the weakness of the euro compensated for anemic growth in the Asia-Pacific region, Prada’s most important market.
The results are a “poor set of numbers,” Luca Solca, an analyst at Exane BNP Paribas, said by e-mail. While the weakness of the euro boosted revenue, it’s also leading to “a major increase in retail-related costs.”
Asia-Pacific markets, especially Hong Kong and Macau, haven’t shown any clear signs of recovery compared with the final months of 2014, Prada said Friday.
“This ongoing situation continues to severely affect the group’s operating results,” the company said.
Prada said it’s taking action that will involve “an extensive plan to overhaul the entire value chain” and that the first-quarter performance shouldn’t be extrapolated over the full year. Underlying business improved in May and June, led by double-digit growth in Europe and Japan, Prada said.
The company’s plan, which includes opening less than 30 stores net of closures in 2015 and curbing discretionary expenses, “aims to start again a growth trend as well as to rationalize operational processes to increase efficiency, so as to achieve a return at the levels of profitability enjoyed until the recent past,” Prada said.
The shares closed up 1.2 percent at $39.75 in Hong Kong Friday. They’ve declined 27 percent in the past year. Andrew Roberts, Bloomberg
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