Prada'S Medium-Term Net Profit Plunged, Luxury Industry Is Approaching Winter?

In the autumn, the 2014 semi annual report released by Prada made the luxury industry feel cool.

In the half year of July 31st, Prada's revenue increased by 1.3% to 1 billion 751 million euros, with a fixed exchange rate of 4.5%, while group net profit dropped by 20.6% to 245 million euros, with net profit of 308 million euro last year.

In the past, Prada has been very attractive since its listing on the main board of the Hongkong stock exchange in 2011.

In 2011, the 4 month old Prada released its first Chinese newspaper with a net profit of 180 million euros, an increase of 74.2% over the same period.

Net profit increased by nearly 60% in the first half of 2012 to 286 million euros, and net profit in the first half of 2013 was 308 million euros, up 7.7% over the same period last year.

For the first half of this year, the reason for the decline in net profit is that Prada is affected by macroeconomic and exchange rate effects. It is expected that the situation in the second half of this year will be roughly the same as that in the first half of the year.

Insiders said that the growth rate of revenue is not enough to support the cost of store expansion is an important reason for the weak growth of performance.

Zhou Ting, President of the Institute of wealth research, believes that although new stores are one of the important ways to promote sales growth, many luxury brands are moving closer to the Internet, electricity providers and big data. They are more active in developing products, experiences, purchases, and after-sale services to the Internet, adopting more new media marketing methods, and some companies even begin to consider the mobile Internet of luxury brands.

Under such circumstances, Prada will continue to develop large scale stores with large risks.

From the regional perspective, the Asia Pacific market, which has served as Prada's "locomotive", has lost its momentum.

Asia Pacific revenue declined by 2.1% in the first half of this year, due to the weak market demand in Korea, Hongkong and Singapore.

However, the net sales in mainland China and Macao maintained double-digit growth.

Prada in its hometown of Europe, the performance is not ideal, market revenue declined slightly.

It is worth noting that the momentum in the Middle East is fierce, and revenue in the first half of this year has increased by 21%.

In its report, JP Morgan pointed out that Prada's net profit in the first half of the fiscal year has gone back sharply, worse than market expectations. The management blamed the problem on the fluctuation of the exchange rate and narrowed the gross margin and the lack of enforcement of leather products.

The report said that so far, the business performance of the third quarter has not recovered, and the group has continued to increase sales outlets and invest in its brands, but sales have not improved so far, and the share price performance is expected to remain weak for the whole year.

It will retrogress 16% to 526 million euros.

In recent years, Prada's bags have repeatedly raised prices, but the share price has gone down in reverse direction.

Barclays reduced the target price of Prada from HK $46 (7.7560, -0.0008, -0.01%) to 6% Hong Kong dollars to HK $43, maintaining a "reduction" rating, believing that the weak retail market will make Prada's income continue to be weak.

There is still pressure to reduce the forecast of earnings per share in the next two years by 10% and 8% respectively.

J.P. Morgan has maintained a "neutral" rating with a target price of HK $46.2, while lowering its profit and revenue forecast for 16% this year, believing that the stock price will remain weak in the short term.

Throughout the whole

Industry, in the past year, especially in the first half of this year, in the European market downturn, China's anti-corruption campaign, and unfavorable exchange rate changes and other factors, most brands sales and profit growth rate dropped to below 10%.

The LVMH group's sales growth slowed again in the two quarter of this year, with a real growth of 1.3%, from 6 billion 719 million euros last year to 6 billion 803 million euros, with an organic growth rate of only 3%.

In addition, Herm luxury s and other luxury brands have been cautious about shop expansion in recent years. In fiscal year 2013, the number of Herm store s stores has even declined, and RalphLauren, Burberry and so on have maintained a low growth rate of about 5% of shops.