After a strong pattern of growth over the past several years, things are not looking so great for Prada. In fact, the Italian design house's profits fell 24% in the first fiscal quarter of 2014, in comparison to the same quarter last year. Net income dropped to $143.3 million, down from $188.8 million, and sales fell 0.6% to $1.05 billion, compared to the same period last year. The company's performance was hampered by declining wholesale income, currency-exchange effects, and of course, the decrease in demand following China's crackdown on corruption. Prada execs, most notably, Carlo Mazzi, President of the Prada group, claim the slip in sales and growth are the result of "a quarter of transition" and expect orders to pick up in line with 2013.
Interestingly, Prada, which appeared to have weathered the storm of logo-fatigue that hit Louis Vuitton and continues to hit Gucci, is suffering right along with its fellow luxury sector brands, namely, Louis Vuitton and Gucci, thanks to the overall slowdown in luxury spending and the growing competition in the form of affordable luxury brands (which are becoming increasingly successful in Europe). Case in point: Prada's leather goods sales, in particular, are down; the house reported a 3% decrease in this division in the first quarter, compared with a 29% rise the previous year.
The house, which is under the creative direction of Miuccia Prada, is hoping to make up for its losses with men’s growing taste for finely-cut suits and leather bags. In April, execs at the 101-year-old brand said they aim to almost double menswear sales to $2.1 billion over three to five years, and open more dedicated men’s shops. Along with other store openings and an increase in production capacity, the company told analysts and investors it expected the expansion of its menswear business to help return it to double-digit sales growth by 2016.