Italian fashion brand Prada has successfully rebounded in the second half of 2020, overcoming the challenges posed by the COVID-19 pandemic. The company’s strong performance in China and other Asian markets, coupled with a surge in online sales, have contributed to this positive trend.
Luxury fashion brands have experienced a significant decline in sales due to the global crisis, particularly with the decrease in tourism and travel. However, Prada has managed to recover thanks to the improving situation in China, which is one of the largest luxury markets in the world.
In addition to that, Prada has benefited from the ongoing shift towards digital sales in the luxury goods industry. The company reported a remarkable increase in e-commerce sales in 2020 compared to the previous year, with sales more than tripling. To capitalize on this growing trend, Prada expanded its e-commerce operations into new key markets and revamped its website.
Lorenzo Bertelli, Prada’s marketing head and son of the company’s founders, sees immense potential for further growth. He believes that Prada is only at the beginning of its growth trajectory and there is still a huge untapped potential.
Despite the challenges posed by the pandemic, Prada remains optimistic about its performance in 2021. While there are still 130 stores closed due to the ongoing pandemic, early results for 2021 have been positive. CEO Patrizio Bertelli expressed confidence in a rebound once the most critical phase of the pandemic subsides.
Prada attributes its recovery in the second half of 2020 to strategic measures taken to adapt to the changing market conditions. The company focused on strengthening its relationship with local customers, who compensated for the absence of tourists to a certain extent. This, along with other initiatives, led to a full recovery in profitability levels in the second half of the year.
In terms of sales geographically, Prada saw a significant increase in mainland China, Taiwan, Korea, and the Americas. However, Japan and Europe experienced declines due to the lack of tourists and ongoing lockdown measures.
Overall, Prada’s full-year revenues for 2020 fell by 24% to 2.42 billion euros ($2.9 billion), but the second half showed improvement compared to a 40% decline in the first half. Earnings before interest and taxes (EBIT) totaled 20 million euros for the year, with a 216 million euro EBIT in the second half, similar to the same period in 2019.
Prada’s actual results exceeded analysts’ expectations, who had anticipated lower revenues and EBIT. As a result, the company’s board decided to pay a dividend of 0.035 euros per share, which is a significant decision considering they did not pay any dividends in the previous year.
Useful links:
– Business of Fashion: Prada’s New Strategies and Initiatives
– Investopedia: Understanding Compound Growth
