Investors shun Prada as shares slide to a two-year low on weakening sales – putting it out of step in the race against luxury goods rivals Burberry and LVMH.
The script is as follows:
REPORTER: The shock drop in quarterly sales for Prada is causing ripples in the luxury brand sector. The fall in sales could see the top end Italian brand signal a cut to full year sales. Over the past year Prada’s share price has been coming under continued pressure. The latest news led the shares to hit two-year lows. Part of the pressure is coming from an unfavorable exchange rate. The other drag is demand. With sales in Europe sluggish, luxury brands are relying on Asia to plug the gap. Alpari’s Craig Erlam says Prada’s struggles could be the start of a downturn trend for luxury brands.
CRAIG ERLAM, MARKET ANALYST, ALPARI: ”Asia’s such an important market for these luxury brands, that when you see sales struggling there, its got to be a major concern for Prada. Yes they may have exposure to other parts of the world, but Asia is being seen, not just now but going forward, as a hugely important market, so I think we’ve got to be really concerned about this.”
REPORTER: So far other luxury brands have weathered the storm well. The quintessentially British luxury brand Burberry saw an 8 percent rise in annual profit. Equally, the world’s biggest luxury group LVMH saw a strong start to the year with sales to Chinese and European customers improving. But no doubt, as exchange rate struggles continue, not only Prada will have to think outside the box to give the customer more bang for their buck.