MILANPrada SpA is the latest to feel the pain of luxury’s slowdown.

Industry observers say the luxury sector needs to brace itself for years of slower growth, and firms are already feeling the pinch. Compagnie Financière Richemont SA earlier this month said the year is off to a disappointing start, while Kering has declared 2015 a year of “reflection” in its China operations following years of rapid expansion across the Greater China region. The World Bank last week warned that developing economies like China, Russia and Brazil are likely to see significantly slower growth for years — meaning the developed world will once again become the engine of the global economy.

Prada provided further evidence of the potentially difficult times ahead, on Friday reporting a 44.2 percent drop in net profit on a 6.5 percent rise in revenues in the first quarter, mainly hurt by its performance in the Asia-Pacific region. “Results for the quarter have been conditioned by the continuing difficult market conditions in the Asia-Pacific area, especially Hong Kong and Macau,” said chief executive officer Patrizio Bertelli. “In contrast, we have seen highly positive signs in key markets like Europe and Japan, and this, together with a general improvement in organic growth in the month of May, encourages us to continue along our chosen path.”

But the luxury slowdown is forcing Prada to revamp its strategy, including putting the brakes on retail expansion and reorganizing its operations. “The group continues with its review of operational processes in order to increase efficiency,” said Bertelli. “At the same time, we are in the process of revising the group’s organizational structure, in order to bring it in line with the new business reality, which has grown considerably in size over the past few years. We shall remain focused on design and innovation, key distinguishing features of our brands, which we have proven ourselves to be capable of incorporating in products of exceptional quality, that satisfy the ever-more sophisticated expectations of our clients.”

During a conference call with analysts, chief financial officer Donatello Galli defined Asia-Pacific “the most problematic spot, quite challenging to say the least,” adding that “luxury did not show any recovery [in the area] and Asians are shopping in Europe and Japan.” He noted that the group had not endorsed any “dramatic change in prices, which would damage the brand in the long-term.”

At current exchange, sales in Greater China dropped 5 percent, but at constant exchange they would have decreased 23 percent, mainly affected by Hong Kong and Macau. This is an adjustment for Prada, which opted for a public listing in Hong Kong in 2011, and has since heavily invested in building its retail network in the area. Galli contended that “people were expecting companies to lower prices in Asia,” and that “media were trying to get brands to lower their prices in China.” He claimed the Asia-Pacific “is a bad market for everyone, less people shop in Hong Kong, not only in luxury but also in the mid-market segment.” Referring to Macau, he said that “more people are going to Macau, not shopping or gambling, but that there are many new investments.” That said, Prada has “frozen some projects there, now is not the right moment.”

A slowdown of Prada’s retail channel, which at the end of April included 603 directly operated stores, also affected the group’s performance in the period, as sales grew less than costs. Retail sales totaled 749 million euros, or $816.4 million, up 7 percent at current exchange, but were down 5 percent at constant exchange. Prada has been slowing down the opening of new stores and is expected to unveil 24 to 26 stores in 2015, mainly in new countries such as South Africa and Vietnam.

In the three-month period ended April 30, the group’s net profits plunged to 58.7 million euros, or $64 million, compared with 105.3 million euros, or $144.2 million, in the same period the previous year. The strengthening of major currencies against the euro helped revenues rise 6.5 percent to 828.2 million euros, or $902.7 million, compared with 777.7 million euros, or $1.06 billion. At constant exchange, sales would have decreased 5.4 percent.

Figures are converted at average exchange rates for the three-month period to which they refer.

Profit margins for the quarter were affected by the limited growth in retail sales and earnings before interest, taxes, depreciation and amortization dropped 23.9 percent to 162.7 million euros, or $177.3 million, or 19.6 percent of sales.

“The pressure on margins was above our expectations; we were looking at some better performance in some markets that did not materialize,” said Galli.

Operating profit stood at 90.7 million euros, or $98.8 million, a 42 percent nosedive.

Europe showed an 11 percent gain thanks to the flow of tourists, especially from Asia and North America given the weakness of the euro, and Japan was up 6 percent to 97.8 million euros, or $106.6 million. Since April, this market has returned to double-digit growth, said Galli.

The Americas rose 16 percent to 95.3 million euros, or $103.8 million. The Middle East was up 13 percent, but both markets were affected by a drop in the number of tourists.

The Prada brand was up 5 percent to sales of 614.8 million euros, or $670.1 million, but saw a fall in volumes, mainly in Asia-Pacific. Miu Miu grew 19 percent to 119.9 million euros, or $130.7 million, with double-digit increases recorded in Europe, the Americas and the Middle East. Church’s and Car Shoe saw sales growth of 16 and 20 percent, respectively.

As of April 30, the net financial position was positive at 127 million euros, or $138.4 million.

Chairman Carlo Mazzi said during the call that he “underline[d] the outstanding growth” of the group in the 2009-2014 period and the expansion of retail subsidiaries to 55 from 36 countries around the world, and noted that the group had “not completely adapted to the new size.”

He cited a “tougher and demanding” market, and “new relations to be built in new cities.” He said that in 2014 Prada focused on the footwear and ready-to-wear divisions, “neglecting” leather goods, which also suffered because of a tougher Asia-Pacific market and increasing competition. Mazzi said first-quarter margins were under pressure due to a “weak retail trend,” and marketing initiatives focused in the period. He said the outlook in the next month is of significant improvement in margins, with “a normalized retail, ongoing revision of structure, an optimization of its product mix and a more balanced pricing consistent with the locations.” Mazzi also noted an increased “commitment to digital activities.”

He cautioned analysts by saying that the first quarter did not offer the “right outlook” and that it marked a period of transition for Prada.

Galli said the like-for-like performance in May and June was showing a trend of improvement with double-digit growth, citing Japan, Europe, excluding the U.K. and China. “We have hopes for Mainland China versus Macau,” he said, noting that he expected a rebound in China in the second part of the year.

Galli said that today’s current volatility made it difficult to calculate the real impact of foreign exchanges in the 12 months. He stressed that Prada will keep introducing new products and expressed hope in new bags in a higher-end price range and due to hit stores now. He underscored that rebalancing the merchandise mix and prices is “more complicated.” The group is also launching new products in the 1,000 to 2,000 euro-range, or $1,100 to $2,200.

“Probable foreseeable margins are strictly related to geographic mix,” said Galli, and an outlook of “flat margins is challenging.”

Leather goods inched up 1 percent to sales of 485.4 million euros, or $529 million, while footwear jumped 35 percent to 128.6 million euros, or $140.1 million. “In the last couple of years, shoes have done very well,” said Galli, believing that the category is for “a more conscious customer, while leather goods is more opportunistic and more volatile.”

In a report, Citi analyst Thomas Chauvet said the “luxury market is going through a readjustment marked by greater speed-to-market and competition in leather goods.” He noted that Prada’s “management remains confident in the luxury industry’s long-term fundamentals and the execution of Prada’s strategy but acknowledged the need to increase operational efficiency through a reduction in the speed-to-market/production lead time and better inventory replenishment systems; it will also put greater emphasis on control of discretionary expenses and expand distribution more selectively.”

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