MILAN — Prada SpA had a tough 2015 — and it’s cautious about the outlook for this year too.
A slowdown in China, which affected the Asia-Pacific area, and flat sales, which did not absorb group costs, dented Prada’s profits last year. And in light of the ongoing instability of the economy, Patrizio Bertelli, chief executive officer of the Italian luxury group, was reluctant to forecast how the group would perform in 2016.
“Throughout 2015, the luxury-goods market had to deal with an economic environment characterized by volatile financial markets and by heightening geopolitical tension in different regions across the world,” said Bertelli. “These conditions are still present and 2016 is expected to be affected by instability which makes any short-term forecasts uncertain.”
Prada on Friday reported a 26.6 percent drop in profits in the 12 months ended Jan. 31 to 330.9 million euros, or $364 million, compared with 450.7 million euros, or $590.4 million, in the same period in the previous year.
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Earnings before interest, taxes, depreciation and amortization were down 15.8 percent to 802.8 million euros, or $883 million, from 954.2 million euros, or $1.25 billion, in the group’s 2014 fiscal year.
Operating profit dropped 28.3 percent to 503 million euros, or $553.3 million, from 701.5 million euros, or $919 million.
Sales totaled 3.54 billion euros, or $3.91 billion, compared with 3.55 billion euros, or $4.67 billion, in the previous fiscal year, as reported in February. The higher costs associated with the expansion of the group’s retail network were not fully absorbed due to the slowdown in sales.
Dollar figures are converted at average exchange for the period to which they refer.
Bertelli said that “in order to ensure the group achieves satisfactory profit levels, we have recently implemented a thorough review of all operating processes. The results, in terms of greater efficiency and productivity, will be apparent in the months to come.”
Last December, talking about the nine-month results, Bertelli said during a call with analysts that the company was focusing on technology and social media, from Instagram to Twitter, to engage customers and that, from mid-January, Wi-Fi service would be available in its network of Prada and Miu Miu stores to make products more accessible to customers. The executive further highlighted this strategy on Friday. “We will pay particular attention to new forms and methods of communication designed to develop a relationship between our brands and an ever-larger audience, based on a permanent dialogue embracing the various parts of the Prada universe. At the same time, we will continue to pave the way for the sustainable long-term growth of the group with investments aimed at enhancing the distinctive features that make our brands unique: excellent product quality with contemporary and innovative design and capacity to interpret the desires of our ever-more sophisticated and demanding customers.”
In the 12 months, the group continued to expand its retail network, although at a slower clip than in the past, while further streamlining its wholesale channel. Wholesale revenues stood at 444.6 million euros, or $489 million, down 16.5 percent, mainly due to the selective strategy implemented in Europe.
Retail sales grew 2.6 percent to 3.06 billion euros, or $3.36 billion, sustained by favorable exchange rate trends.
As of the end of January, Prada had 618 directly operated stores.
Sales in Europe rose 5.9 percent, boosted by the weakening of the euro that drew tourists, especially from Asia and the U.S., in particular in the first half of the year.
Japan continued to grow, posting a 10.7 percent gain, driven by a rising number of Chinese tourists. China’s economy slowed down the Asia-Pacific area, however, which recorded a 4.4 percent drop at current exchange and a 16.1 percent decrease at constant exchange.
Thanks to favorable exchange rates, revenues in the American market grew 5 percent. The strength of the dollar impacted the inflow of tourists, especially from China and South America. Prada recently boosted its presence in the U.S. with the opening of a shops-in-shop for its footwear at the Saks Fifth Avenue flagship in New York.
The Prada brand saw sales inch up 1 percent at retail to 2.49 billion euros, or $2.74 billion, entirely attributable to the exchange rate effect, said the company. Miu Miu was up 1.3 percent and rose 10.3 percent at constant exchange. Church’s grew 14.7 percent.
The licensing business of eyewear and fragrances drove royalties up 13.5 percent to 43.4 million euros, or $47.7 million, also thanks to the launch of the first Miu Miu fragrance.
A conference call to discuss the results is scheduled from New York on Monday.