MILAN — Prada ended the year 2020 on an a positive note, reporting on Tuesday that retail sales showed “a full recovery to 2019 levels” in the month of December.
In a business update, Prada SpA said the second half of the year 2020, despite the group’s store closures, averaging 9 percent of the network, “saw a progressive recovery in sales,” which contributed to the strong December performance.
“I am very satisfied with how we have faced the serious difficulties of the year just ended and how, despite the persistent uncertainty which will likely continue for the next months, we have managed to deliver positive results,” said Prada chief executive officer Patrizio Bertelli. “Thanks to the generous commitment of all group staff, we were able to respond rapidly and consistently to market changes, which has been appreciated by all of our customers.”
In the second half, the impact of the pandemic on the retail channel was limited to an average decrease of 6 percent at constant exchange rates. The company reported a progressive recovery in all geographical areas, and the Asia-Pacific area in particular reported a strong performance as China showed 52 percent growth.
In the first half, Asia Pacific represented 44 percent of total sales, or 370 million euros.
In the second half, the Americas, the Middle East and Russia also registered positive performances while Europe and Japan continued to be impacted by the lack of tourist flows.
The retail channel accounts for around 90 percent of total sales. Prada has consistently downsized its wholesale business for stricter control and the protection of brand positioning.
Positive margins in the second half of the year allowed the group to reach a positive operating profit for the full 2020 year, and an improved net financial position compared to 2019, due to cash generation, inventory reduction and strict control over investments, in particular of stocks and raw materials and of finished products. In the first half, the group’s financial position stood at a negative 515 million euros.
The company attributed the margin recovery to a careful management of quality and product mix.
As reported, in the six months ended June 30 last year, Prada reported a loss of 180 million euros, hurt by the spread of the coronavirus pandemic and, consequently, the closure of the group’s stores from February to May. The loss compared with profits of 155 million euros in the same period in 2019, which benefited from the Patent Box tax relief relating to the years 2015-19.
Revenues in the first half of 2020 amounted to 938 million euros, down 37.6 percent compared with 1.57 billion euros in 2019. The company recorded a negative EBIT of 83 million euros before selling expenses of 112 million euros during the closure of stores, compared with 150 million euros in 2019.
In July, commenting on the first half figures, Bertelli said he saw a further shift into luxury for Prada, touting his decision to spearhead a no-markdowns policy and to slash wholesale accounts, but he spelled out his aspirations to further raise the profile of the brand.
“Values will change and how products will be distributed will also change, but the market is growing not declining. I think the strategy we are pursuing — to place the group in the high-end, luxury bracket — will allow us to achieve the contribution margins [we want].”
The move is expected to help the group to reach gross margin targets for 2021 of 75 percent.