For awhile there, Prada seemed immune from troubles in the luxury market, but that just isn't the case anymore. The Italian design house posted a 43.8 percent drop in third-quarter profits, saying that it faced increased competition amid an uncertain economic outlook. According to Reuters, "Prada's net profit for the three months ending on October 31, 2014 was 74.47 million euros, a drop from the 112 million euros forecast by JP Morgan. Overall sales fell 5.6 percent, while sales of higher-margin leather goods dropped 9.1 percent." You may recall that in August, the house, which is helmed by Miuccia Prada, reported the slowest half-yearly sales growth in three years after experiencing stellar sales increases for the past several years.
The house's reasons for slow growth appear to be the same. Demand in the Asia Pacific region, which accounts for more than a third of sales and is Prada's biggest regional market, has decreased due to as an uncertain economic outlook, and China's crackdown on corruption. More recently, though, pro-democracy protests have also blocked access to major Hong Kong shopping districts for nearly two and a half months. About 10 percent of Prada's sales come from Hong Kong alone.
It seems that the only house that has consistently reported growth in the past several years is Hermès. With Louis Vuitton and Gucci experiencing difficulties due to logo fatigue, and Prada struggling, as well, Hermès reported in November that its third-quarter sales beat estimates, as buoyant demand in Japan and the Americas helped compensate for a slowdown in China. The Paris-based house's third-quarter revenue rose 11 percent to 990.6 million euros ($1.2 billion). Before that, first-half revenue rose 7.9 percent to 1.91 billion euros, and was up 12 percent at constant exchange rates, Hermès said in July. Supply constraints and high prices have helped cushion Hermès from softening luxury demand in Asia that led Gucci-owner Kering and LVMH Moet Hennessy Louis Vuitton to report lower first-half profits.