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China slowdown means flat still the trend at Prada

[MILAN] Prada's annual sales were broadly flat for a second consecutive year in 2015 as the slowdown in China continued to weigh on the high fashion and luxury goods brand.

Weak sales in Asia Pacific outside of Japan and in the United States failed to offset an improved picture in Europe, where the weak euro bolstered sales to bargain-hunting tourists from outside the region.

Total revenue at a group which includes clothes line Miu Miu and upmarket cobbler Church's totalled 3.545 billion euros, broadly in line with expectations but slightly below a figure of 3.552 billion euros registered in 2014.

Sales in Asia Pacific outside Japan were down 4.0 per cent at current exchange rates and 16 per cent at constant rates.

"The economic situation in the Chinese market remains negative, although there was some improvement in the final quarter," the company said in a statement accompanying the results.

A stronger dollar hit sales in the United States by making purchases of pricey handbags and other luxury products significantly more expensive for visitors planning to splash the cash on vacations.

The opposite trend was witnessed in Europe where the weaker euro ensured sales at constant exchange rates were up five per cent on what the company described as "a steady stream of tourists, especially from Asia Pacific and the US." Japan registered sales growth of 11 per cent (4.0 per cent at constant exchange rates).

In a statement, chief executive Patrizio Bertelli said the Milan-based but Hong Kong-listed company had had to contend with an environment of "extreme volatility" due to currency fluctuations and events such as the Paris attacks which dampened tourist trade in the fashion capital.

"These two factors have made prices fluctuate widely and diverted tourist traffic in sudden and unpredictable ways," Bertelli said.

Some fashion commentators have suggested that Prada's problems go beyond economic issues with the brand having arguably become dangerously associated with conspicuous consumption during China's boom years. As a result it is now seen as being snubbed by young trend-setters.

But Bertelli attempted to reassure investors that the company was on track to return to growth.

"Our retail network - now truly global thanks to investment in recent years - enables us to keep developing a direct relationship with our ever more demanding customer all over the world," he said.

He said Prada was planning new commercial and marketing initiatives and "an extensive digital project" to strengthen dialogue with customers.

"These actions, taken against the background of rigorous and disciplined cost control, will enable us to consolidate our market position with satisfactory margins and returns on investment," said Bertelli, the co-founder of the group along with his wife, creative director Miuccia Prada.


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