Prada, one of the most beloved and recognizable luxury brands, experienced a huge hit in its 2014 profit — in part, apparently, because of a crackdown on Chinese government corruption.
The hit is largely caused by slumps in sales in the China and European markets and the failure of growing retail sites in the Americas and Japan to offset the declines. The Asia Pacific region, not including Japan, accounts for 36 percent of Prada’s sales and during the 2014 fiscal year the area saw a 3.1 percent drop in sales, with the worst numbers coming from China, which saw a 7 percent decrease.
One practice that's been on the decline in China is bribing officials with lavish gifts — which appears to have hurt Prada's bottom line. Prada’s net profit dropped 28 percent in the 2014 fiscal year, with the company reaping in $489 million.
This crackdown on corruption was introduced by Chinese president Xi Jinping and is commonly referred to as the “anti-extravagance” campaign, which is an attempt to curb the excessive buying habits of government officials.
China’s recent pro-democracy protests have also been a cause for trouble for Prada this fiscal year.
The protests have closed down major roads in Hong Kong causing a decline in Chinese tourists, who are instead visiting South Korea and Japan. The increase in tourists to South Korea has boosted Prada’s wholesale in the country.
The Prada Group encompasses multiple brands including, Prada, Miu Miu, Church’s and Car Shoe, but Prada was the only brand that saw a decline in their net sales.
Due to the decline in Prada’s profits, the company has stated that it would have to cut costs and open fewer stores next year than they had planned.
state@dailytarheel.com
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