Once it's hottest and booming markets, Prada Spa is witnessing a major dip in profits in China and Hong Kong, The Italian luxury brand saw a fall of almost a quarter in its net profit in the first half as sales dipped in China and Hong Kong. Prada, much like several other luxury brands is struggling in mainland China, as Chinese consumers prefer shopping in Europe and Japan for handbags and other luxury products. This is because these products are cheaper there due to exchange rates and the lack of high import duties. Besides, China’s ongoing crackdown on corruption and gift-giving has also hindered the demand in the market.
However, China’s slump is particularly affecting Prada as its handbags and fashion are losing ground. Apparently, Prada was discounting at its stores, a practice, which is typically avoided by high-end retailers to avoid hurting the brand.
The Italian fashion house is still struggling to get back on track after a number of weak quarters, despite favourable exchange rates with a weak euro. The brand also admitted that the ear future does not seem bright. Donatello Galli, Chief Financial Officer believes that in the second half, there would not be a huge improvement either, but that they are working towards cutting expenses wherever possible.
Moreover, analysts say the brand has suffered due to lack of innovative products. The brand is working on launching new handbags to overcome this hurdle. It would be the category that has typically driven growth and has high margins.