Prada shares plunge after shock profit drop

 

Shares in Prada plunged more than 7 per cent in early trading after the Italian luxury giant revealed a shock drop in sales in the first quarter.

The shares slumped to their lowest in nearly two years on news its European sales dropped 4.1 per cent and net income fell 24 per cent to €105.3 million (£85.4 million).

Net sales dropped 0.6 per cent to  777.7 million, missing analysts forecasts because of a slowdown in Asia and Europe.

Luxury fashion brands have recently been hit by a change in spending patterns, particularly in Asia, where shoppers are moving away from logo-heavy products.

Luxury brands Louis Vuitton and Gucci have already suffered and they are now focusing on more expensive items with smaller and fewer logos. Prada said it has employed a strategy for “more selective growth and a more balanced product portfolio”.

Patrizio Bertelli, chief executive officer at Prada, said: “The trend of solid growth maintained in the retail channel confirms that we have made the right strategic decisions.”

Prada reported a slowdown in Korea, Hong Kong and Singapore, and said its business in Europe was hit by a reduction in tourist footfall and the strength of the euro. But it added its US and Japanese retail sales were strong.

Shares in luxury peers felt the effect of the news: Burberry fell 1 per cent, Paris-based LVMH and Kering slipped 1.8 per cent and 0.6 per cent respectively and Swiss-based Richemont eased 0.6 per cent.

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