Another Luxury Brand Faces Hong Kong Headwinds

The consolidated net revenues of the Hong Kong listed Prada Group for the six months ended July 31, 2015 amounted to Euro 1,823 million, with a 4 percent increase compared to the corresponding period in 2014, entirely thanks to the retail channel which more than compensated for a decrease in wholesale channel sales.

Prada, which also operates the brands, Miu Miu, Church’s and Car Shoe brands like other luxury brands is finding the Hong Kong market a drag on revenues.

The European market has continued to grow with revenues up at both current exchange rates up 12 percent and constant exchange rates up 11percent, thanks to a steady flow of tourists together with a recovery in consumption by domestic customers. The tourists as with Japan, were most likely from the Chinese mainland.

The Japanese market also performed extremely well with growth at both current exchange rates up 12 percent and constant exchange rates up 5 percent; double-digit rates of growth were achieved throughout the second quarter.

However the Asia Pacific market shows a similar negative trend, as in the first quarter of the year, offset by a positive rate exchange effect.

Hong Kong and Macau remain the main drivers affecting the performance in this geographical area. Most luxury retailers have been threatening to close outlets in Hong Kong with some saying multiple closures could come unless the retail rents can be renegotiated.

At current exchange rates, sales increased in the Americas and in the Middle East reaching 15 percent growth in both markets; in the Middle East, performance improved significantly in real terms in the second quarter.

Retail channels by brand:

The Prada brand recorded 5 percent growth at current exchange rates, which is entirely attributable to the exchange rate effect, mainly because of the adverse economic situation in the Asian market.

Meanwhile, Miu Miu continued to grow with revenues up at both current exchange rates up 19 percent and constant exchange rates up 6 percent, showing an acceleration in the second quarter of the year.

Church’s has also achieved sales growth, up 19 percent, with the volumes trend also remaining largely positive. Finally, Car Shoe has performed broadly in line with prior year.

Patrizio Bertelli, Chief Executive Officer of Prada Spa, commented: “Sales in the first half of 2015 reflect an economic and exchange rate landscape that remains rather volatile with the continuing weakness of important markets like Hong Kong and Macau and the uncertainty that is looming on other Asian markets.

Our distribution structure, which has achieved an appropriate global presence, together with our awareness of the specific needs of the various markets, has enabled us to compensate for the drop in sales in Asia Pacific thanks to growth on markets which are currently more dynamic like Europe and Japan.

We will continue to prioritize measures intended to sustain long-term growth focusing on our manufacturing tradition and innovation, as again confirmed recently by the success of our latest collections.”






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