June 12, 2013

Prada Expands Inland As Greater China Profits Slow

Looks Beyond First-Tier Cities To Sustain Double-Digit Growth

A look from Prada's Fall 2013 RTW collection. (Women's Wear Daily)

A look from Prada’s Fall 2013 RTW collection. (Women’s Wear Daily)

Prada released its first-quarter growth numbers yesterday, and like many other luxury companies in China this year, has seen slowing but substantial double-digit growth rates in China. The company cites Greater China as a main driver of its reported percentages, but as the numbers slow, it has continued a second-tier expansion plan to continue gaining momentum in the country.

According to the group, its Asia-Pacific market net revenues grew by 23 percent at constant exchange rates, a number higher than than the company’s 14 percent overall growth but lower than last year’s 60 percent surge. The brand states its China numbers are mainly “thanks to the strong contribution of Directly Operated Stores in Greater China,” meaning that Hong Kong likely provided a substantial boost to its overall numbers as it did last year.  Excluding explicit details on mainland growth alone, the company reports that its Greater China region grew by 24 percent.

This omission of the mainland numbers shows that they may not have been worth proclaiming as China’s luxury slowdown continues, but the company is pursuing expansion in the mainland’s second- and third-tier cities. With 25 boutiques in China, Prada opened stores in Nanjing’s Deji Plaza Mall, Changchun’s Charter Shopping Center, and Hefei’s Intime Plaza Mall in 2013. Meanwhile, the group’s smaller label Miu Miu saw an opening in Qingdao’s Hisense Plaza Mall in January. While some brands are opting to limit second-tier expansion for the moment to remain exclusive, Prada’s strategy is in line with companies looking beyond the first tier to boost lagging mainland growth.

According to a statement by Prada Chief Executive Officer Patrizio Bertelli, the international economic environment “remains extremely volatile and uncertain” for the company, and Miu Miu saw particularly slow growth of 5 percent. However, the brand’s chief financial officer Donatello Galli expressed the feeling that Miu Miu “can be huge” in China and will be a main focus of Prada’s expansion efforts there in the coming years. According to a South China Morning Post article, Miu Miu hopes to increase its brand awareness in China to make up for lagging Europe sales:

 Analysts say Miu Miu’s growth is hampered by the fact it is better known in recession-hit Europe, rather than America and Asia Pacific where the whole group posted growth over 20 per cent for the first quarter.

Prada had also hoped that its Great Gatsby-related marketing campaign would boost sales this quarter. Both Prada and Miu Miu looks were featured in Vogue China’s “Great Gatsby” recent photo shoot.

Fashion / Retail
Tag: china, china luxury, chinese, first-tier... , More
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