Clean Up Wholesale Channels And Stabilize Pricing Power. Prada Refuses To Recognize Light Luxury.

Italy luxury group Prada SpA (1913.HK), which has been straggling for the past 5 years, wants to rectify its wholesale business to maintain its high-end positioning. SpA

Before the Hong Kong Stock Exchange on Tuesday, Prada group issued a notice announcing that the independent partner network had been reformed since May 16th. The company said that after a detailed analysis of the wholesale channel structure, the board noted that the wholesale market became more complex and decentralized. Therefore, it was considered that restructuring could ensure more consistency in pricing policies for retail and digital channels, and strengthen group brands at the same time to support sustainable long-term growth targets.

Italy Group CEO Patrizio Bertelli and Miuccia Prada criticized the US wholesale channel 6 years ago, and satirize the fact that the department store industry is too cheap, often discounting and thus hurting the brand value. It even claims that Prada group would rather sacrifice sales than go to more department stores, even if the channel can bring an additional 1-2 billion euros to the company every year.

However, the above remarks took place in 2013, and the group is at the peak of its listing on the Hongkong stock exchange.

In this regard, the Italy group quickly welcomed the "retribution", which has been in a recession since 2014, and its profits continued to fall for five years.

Although the luxury industry began to decline from the end of 2013, but the first tier Louis Vuitton Louis Weedon, Gucci Gucci, Chanel Chanel, Herm s s, Coach Coach, Dior Dior, as early as the second half of 2016, welcomed a retaliatory rebound, especially Gucci.

During the past five years of recession, Italy group did not carry out the bold words of Patrizio Bertelli in 2013. Carlo Mazzi, chairman of the group, even downplayed the concept of "luxury" in 2015, and put forward a "cost-effective" strategy. He said, "I don't like the word" luxury ". I prefer beauty, value and creativity. Value for money / cost performance is our future strategy.

While clearing inventory and increasing sales of wholesale customers through online channel customers, sales of wholesale channels in Prada Group recorded double-digit growth in the 2016 and 2017 sales, while the same growth rate in 2018 was narrowed to a low single digit.

Retail analyst Tang Xiaotang said that the growth of Prada group's wholesale sales did not provide the company with the overall growth momentum. In fact, the recognition of the group's brand name as a first-rate luxury goods continued to decline in the most important Chinese market, and was replaced by the tide cards of Balenciaga, such as Paris and Supreme New York. On the contrary, Tapestry Inc. (NYSE:TPR)'s Coach brand, Capri Holdings Ltd. (Holdings) and other light luxury brands have made progress in the past few years to clean up the department store network, thus improving the positioning. Therefore, Prada group does not reshape the brand, it may slide to light luxury cognition, and the price of luxury goods will not give consumers any interest in the company's products at all.

The decision to rebuild the wholesale channel again depends on the development of the Italy group in the electricity supplier channel. In September 2017, Lorenzo Bertelli, the founder and wife of the group, acted as the head of the group digital communication department. The channel of the electricity supplier can undertake the task of the wholesale channel to a certain extent, and at the same time, it can continue to control the pricing power.

Lorenzo Bertelli, a 31 year old family business successor, has come to the front office nearly two years after joining the company. For the first time, he attended the analyst conference call at the beginning of the year. He signed a cooperation agreement with Adobe this month, which is the first major public cooperation he signed since he was appointed.

In addition to the failure of its own strategy, the downturn in Prada group also reflects the predicament of Italy's fashion industry as Europe's most traumatized European financial crisis.

On Monday, Italy s National Fashion Chamber, chairman of Italy Fashion Association Carlo Capasa, at the Milan men's clothing week press conference, said that the industry growth rate was only 0.2% in the first quarter, while the compound growth rate in the past 10 years was 3%.

Fashion industry is an important economic component of Italy, accounting for GDP to 4%. In 2018, the sales of Italy fashion industry increased by 2.8% to 66 billion 600 million euros, including accessories, total sales increased 2.3% to 89 billion 300 million euros, close to 90 billion euros sales, more than 75% were from exports.

Italy's tax policy has been an important factor in the development of the fashion industry. Patrizio Bertelli has appealed to the government to cut taxes. However, the Italy government did not take action, but also launched a large-scale and very strict tax investigation to the best profitable luxury industries, including Prada group and Gucci. During the process, a huge settlement was lifted. Kering SA (KER.PA) recently concluded a 1 billion 250 million euro agreement with the Italy tax bureau. Prada group also signed similar agreements in 2013, and streamlined the structure to remove Luxemburg Off Shore Company and merge holding company back to Italy.

The new strategic adjustment failed to boost Prada SpA (1913.HK) Prada share price. Italian company dropped 1.89% HK $23.30 on Tuesday with Hang Seng Index, which has recorded a 9.69% decline so far this year, slightly losing its 7.01% share in the same period. In the past 12 months, it fell 43.17%, while the index continued to decline 11.45%.