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Prada pins its hopes on a digital growth strategy and rebounding demand

February 13, 2017 10:41 AM
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(Bloomberg)—Prada SpA said growth resumed last month as the Italian luxury-goods maker puts more than a year of sliding sales behind it, helped by a revival in Europe and Asia.

January showed “positive results,” the company said in a statement Monday as it reported a 9% drop in annual sales at constant exchange rates.

The recent improvement in business shows how demand is outstripping supply for new Bibliothèque and Cahier handbags. Prada is aiming to double its e-commerce sales in each of the next three years by increasing the number of categories it offers online, particularly shoes, and expanding its social media activities.

Prada is revising its digital strategy with “the creation of a highly skilled team with professional experience from the digital technology and new media industries. In the meantime we are strengthening the retail management structure with the aim of integrating online channels with traditional channels in a truly innovative dimension,” CEO Patrizio Bertelli said in the statement.

Prada joins luxury peers including LVMH, No. 46 in the Internet Retailer 2016 Europe 500; Gucci-owner Kering SA (No. 147 in the Europe 500) and Burberry Ltd. (No. 215) in reporting gains after several years of ebbing demand in China and a slowdown in tourism in Europe. The company identified Europe and Asia as its most dynamic areas, saying France showed “clear signs of recovery” in the last quarter, while China is back to rapid growth. Declines in Hong Kong and Macau are moderating, it said.

“Prada’s sales performance was broadly in line with expectations and improving fourth-quarter trends should be evaluated against a sector backdrop where virtually all its peers have beaten fourth-quarter sales consensus in recent weeks,” Rogerio Fujimori, an analyst at RBC Capital Markets, wrote in a note. January sales likely benefited from calendar effects related to the Chinese New Year, he said.

The sales were released after the close of trading in Hong Kong, where Prada shares are listed. The shares had dropped 1.7% trimming their gain for this year to 21%.

Prada’s 2016 sales by region (at constant exchange rates):

  • Americas down 12%
  • Asia Pacific down 12%
  • Europe down 5%
  • Japan down 13%
  • Middle East down 10%
 

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