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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Lvmh Moet Hennessy Louis Vuitton SE | EU:MC | Euronext | Ordinary Share |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 774.40 | 790.00 | 745.00 | 0.00 | 07:37:22 |
By Manuela Mesco
Italian fashion house Prada SpA said its third-quarter net profit fell by nearly half, far worse than expected, as slower demand for luxury goods in many parts of the world, especially Asia, pegged back sales.
Prada said on Friday that its net profit in the three months to Oct. 31 fell to EUR74.5 million ($92.4 million), compared with EUR132.6 million posted in the corresponding period last year, while revenue dropped 5.6% to EUR800.7 million.
The result highlights a progressive slowdown in the company's performance, which has moved away from stellar growth rates seen in previous years to a constant decline in profit since the beginning of 2014.
"This is a significant negative surprise," said Luca Solca, analyst at Exane BNP Paribas, commenting on the results, which were well below expectations, as the company itself acknowledged.
Other luxury goods megabrands, such as Kering's Gucci and LVMH Moët Hennessy Louis Vuitton, have similarly suffered a slowdown recently due to changing consumers' tastes and increased competition. A protracted economic crisis in Europe and cooling markets in Asia--due to general macroeconomic conditions and recent protests in Hong Kong--have brought even more headwinds to the heavyweight in the sector.
The Prada brand posted a 7.5% decline in revenue, while sales in the Asia-Pacific region fell almost 7%. The company's executives stressed that the third-quarter result was dragged down by a very negative performance in the month of October, significantly impacted by lower revenue in Hong Kong and Macau.
"The luxury-goods market is changing," Prada's chief financial officer Donatello Galli said in a conference call with analysts on Friday, explaining the sales slowdown. New consumers' tastes and perception of luxury brands are emerging and each region in the world has different needs in terms of products and strategic approaches. Yet the extent of the readjustment "is not entirely clear," chief executive Patrizio Bertelli said.
Prada said that it has already taken steps to counter the slowdown, but these only have resulted in lower profitability so far. It added that more action would be taken, ranging from changing the product mix to cutting costs.
"Some of these actions will produce effects in the forthcoming quarters, since they require some time to be implemented," the company said.
Prada said it would introduce new handbags after a significant deterioration of sales in that category. Leather-goods sales, traditionally the growth engine of the firm, fell over 9% in the third quarter and nearly 6% in the first nine months of the year.
More bags will be launched in the EUR1,000-EUR1,200 price range, said Stefano Cantino, head of the marketing, communications and commercial development. He added that there are opportunities to increase sales and introduce new handbags in the EUR2,500-EUR2,700 price range.
The company's other main brand, Miu Miu, posted a much stronger performance than Prada, with sales up 4.8% in the quarter.
The company's operating profit was down 26% at EUR123.3 million.
Write to Manuela Mesco at manuela.mesco@wsj.com
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