The Prada in China is experiencing a slump after it posted low earnings this year. The numbers are even lower in the last three years so it is apparent that the luxury brand has not seen any growth in the last four years.
According to Bloomberg, Prada in China lost around $864 million in value. It was reported that the 11 percent drop in stocks is the company's lowest share since 2016. One of the reasons for the slump is said to be the Chinese's changed in spending habits. It appears that the consumers are spending less because they are affected by the nation's dwindling economy.
The trade war is another culprit for Prada in China to hit its lowest profit in recent years. Further, it was stated that the Chinese mostly go to Macau and Hong Kong to shop these days because the yuan is getting weaker in their homeland. In turn, one of Europe's most popular luxury brands is suffering from poor sales in its branches in China.
But while Prada's sales are going down, its rivals like the Gucci and Luis Vuitton managed to get around China's slowdown so they still get good sales numbers.
The Business Insider notes that Prada, a Hong Kong-listed company's earnings fell by a tenth to €323 million or US$366 million in 2018. Its sales in China failed to increase in the second half of the year after going up by 17% prior to the slump.
Walter Woo, an analyst at CMB International Securities, said the third of Prada's total profits came from its revenue in the Asia Pacific thus the drop in China is a big deal for the Italian luxury brand.
Consumers in China seem to be limiting themselves now when it comes to shopping especially when purchasing expensive items. With the weakening yuan, the Chinese are now thinking twice about buying high-end products. As a result, brands like Prada will suffer.
But then again, there is still a glimmer of hope for Prada to improve its sales in China. Woo said that this is still possible despite the recent outcomes.
"We haven't seen significant recovery in its China sales during the first two months this year after a weak fourth quarter in 2018," the analyst stated. "We still expect the business improvement for Prada will be slower than peers in 2019 as it takes time for the brand to upgrade its product design and retail operations in the country."
