Coronavirus halts growth at Italy's Prada

Coronavirus has halted two years of sales growth at Italian fashion group Prada, which accelerated in the second half of 2019, the company said on Wednesday.

The epidemic, which is severely hitting sales across the whole luxury industry, “interrupted the growth trajectory” and will have a negative impact on this year’s results, the company said.

“Prada is implementing a comprehensive contingency plan to mitigate such effects, relying on its flexible supply chain and lean organization,” it said in a statement.
The luxury group said it was confident it could overcome the crisis and “be ready to capture the recovery”.

Full-year sales rose by 2.7% to 3.226 billion euros ($3.52 billion) at current exchange rates compared with a 2% increase in the first half of 2019, but they were flat at constant rates.

This marked the second year in a row of sales growth after a three-years decrease, helped by a relaunch strategy focused on renovating shops, new products and digital sales.

Earnings before interest and taxes (EBIT) declined 5.3% to 306.8 million euros last year, hit by ongoing measures to reduce markdowns and scale down the wholesale distribution network.

Analysts had expected revenue of 3.21 billion euros and an operating profit of 306 million euros, according to Smart Estimates provided by Refinitiv.

The Milan-based group, run by husband and wife team Miuccia Prada and Patrizio Bertelli, said in 2019 it would shrink its wholesale network in Italy and Europe in a push to have uniform prices for its products across different outlets and reduce markdowns to boost long-term profitability.

Full-price sales grew at a double-digit rate in the July-to-December period, and “more than offset sharp reduction in markdowns”, Prada said.

The coronavirus epidemic first emerged in China, home to more than a third of global luxury shoppers, at the turn of 2019-2020. It then spread to multiple countries, with Italy the worst affected country in Europe.

Rome last week ordered the nationwide closure of restaurants, bars and almost all shops except for food stores and chemists, telling Italians to stay home except for emergencies, hitting sales of non-essentials.

The results came out after the market closed in Hong Kong, where Prada is listed. The company had previously canceled a scheduled conference call with analysts due to the coronavirus outbreak.