Business: The Politics of Prada

Although luxury goods had been thriving in Asia in recent years, it seems that Prada, the luxury Italian group, is feeling the effects of a slowdown. 2014 sales fell overall by 1% to 3.552 billion euros, slightly underperforming Bernstein analyst Mario Oretlli’s 3.566 billion euro forecast.

Potential reasons for this slowdown include political unrest in Hong Kong, where shares have lost a third of their value over the past 12 months, and anticorruption efforts in China, where government officials are unable to spend as conspicuously on lavish goods as before.

In response to falling sales, Mr. Ortelli projects that Prada will slow growth to 35 new retail locations this year instead of the 65 as previously planned. As of now, Prada directly owns 594 stores. Some analysts believe that Prada’s efforts to expand its number of directly owned stores is detrimental, as consumer tastes for luxury goods shift so rapidly in Asia in particular.

Patrizio Bertelli, chief executive officer and co-founder of Prada, comments: “Throughout 2014, we operated under a geopolitical and monetary environment which was more uncertain and complex than could have been envisaged.”

Contributor: Elaine Chen


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