Prada flags recovery in Asia after virus hits first half sales

07/29/2020 | 08:14am

Italian fashion group Prada said on Wednesday sales had recovered sharply in Asia since June after the fallout from the coronavirus pandemic triggered a 40% decline for comparable revenues globally in the first half of the year.

The revenue fall to 938 million euros (849.59 million pounds) at constant exchange rates in the six months to June was steeper than a 35% decrease forecast by analysts, according to Smart Estimates provided by Refinitiv.

The Milan-based, Hong Kong-listed luxury group posted a net operating loss of 196 million euros, hit by store closures and a near-absence of tourism due to the COVID-19 crisis.

That was also larger than analyst estimates for a loss of 130 million euros. Company executives said the group could break even by the end of 2020 if the recent sales rebound is confirmed.

Prada said it had seen retail sales growth of almost 60% in mainland China in June and 66% in July, and encouraging signs in other markets as movement restrictions eased - though the trend in Europe remained "double-digit negative" due to the lack of tourists.

E-commerce sales surged 300% in June and July.

In a statement, Chief Executive Patrizio Bertelli said the group was confident that overall sales would return to growth in the second half of the year.

Prada said it had cut costs during the crisis, including by renegotiating rents and cancelling or postponing marketing initiatives.

It said the quick reopening of its productions sites, mostly based in Italy, and the direct control over its supply chain had allowed it to supply stores with new seasonal clothing in time and to manage its stock effectively, without excess inventory.

The global health emergency, which first hit the key Chinese market before spreading to Europe and the United States, interrupted two years of sales recovery at Prada, the result of a revamp plan focused on boosting e-commerce and sticking to full-price sales, while reducing the wholesale channel.

The Milan-based group in February appointed Belgian designer Raf Simons as co-creative director alongside Miuccia Prada, in a move which many industry observers see as paving the way for a possible succession.

(Editing by Mark Potter)

By Claudia Cristoferi and Silvia Aloisi

© Reuters 2021
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