Prada Profits Plummet 38% Percent On Chinese Sales Weakness

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Prada (HKG:1913) released their quarterly profits on Tuesday, reporting a 38% drop in profits. The Italian luxury goods manufacturer states that sales have slumped in China and have caused the company’s profits to weaken.

Purchases in mainland Hong Kong were also affected due to a weaker yuan.

Prada announced that two areas saw growth: Europe and Japan. A stronger dollar has caused fewer travelers to visit the United States, resulting in a decline in sales in the country. The company’s Chief Financial Officer, Donatello Galli, stated that market conditions are still complicated, and that the company expects tourism to be down in the coming months, resulting in fewer sales for the company.

During the quarter, which spanned from August to October, the company had a 6% drop in sales, down to €748 million. When currency boosts are not accounted for, this figure rises to a 10% drop in sales. The greater China area experienced a 26% drop in sales during the quarter.

Prada has stated the company will reduce its sales gap in an attempt to discourage travelers who go to other countries to buy their goods for cheaper. Price gaps are a major issue for luxury brands, and this is just one of many ways that the company will try to protect its profit margins in the future.

The company is also looking to limit its number of store openings in 2016 to just 10.

Prada stock closed down 6.58% on the day.

Jacob Maslow is a native New Yorker with  five children. He left his payroll manager position after finding that his true passion was in writing, and has never looked back.

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