Prada Group reports first half 2017 net profit decline of 18,4%

Prada Group said Friday sales were declining due in part to the strong value of the euro lightening the pocketbooks of tourists visiting Europe shopping for luxury goods.

The Italy-based, Hong Kong-listed luxury house said overall net sales slid 5.7 percent on a constant exchange rate basis in the six months to the end of July to 1.47 billion euros ($1.77 billion).

Net profit slumped 18.4 percent to 115.7 million euros at the firm that also includes the Miu Miu, Church’s and Car Shoe brands. Sales in Europe fell by 7.7 percent, or 6.6 percent on a constant exchange rate basis, with only clothes bucking the downward trend.

“The stronger euro at the end of the period adversely affected tourist spending,” said Prada. By region, greater China was the only area to post growth.

Asia Pacific bucked the trend with revenues in line with H1 2016, up 0.4%. Greater China delivered a positive performance, with sales up 5.2% at constant exchange rate and growth also seen across Macau and Hong Kong

The Americas market contained the decline compared with 2016, with sales down just 3.7%. A positive performance for the period was seen in both Mexico and Canada

The European market was down 7.7%, penalised by the strength of the euro, especially in the second quarter, as well as the stabilization of the UK market

Market conditions in Japan remained unchanged, with sales declining by 14.2% at current and constant exchange rates, highlighting weak consumption by both domestic customers and tourists

The Middle East registered a negative trend down 11.7%, due to ongoing geopolitical tension which impacted tourist flows within the region

Sales of leather goods took a hiding, however, dropping 7.9 percent, and footwear sales stumbled 9.5 percent.

EBITDA amounted to €279.6 million, representing a margin of 19.1% of sales (21.2% for H1 2016). EBIT of €166.8 million, representing a margin of 11.4% (13.8% for H1 2016)

The Group generated strong operating cash flow of €208 million (from €267 million in H1 2016) during the period. Net working capital remains unchanged compared to FY levels, despite a slight increase in inventory, ready for more efficient restocking of retail inventory.

Investments for the period amounted to €105.6 million and were allocated both to enhancing the retail network, where the Group has completed 100 projects aimed at bringing the image of the stores in-line with new design concepts, and to the strengthening of the supply chain to further develop the Group’s industrial and logistics capabilities.

Net Financial Position at 31st July 2017 was negative at €223 million following the payment of dividends amounting €307 million.

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