Thanks to cost containment measures and a rebound in sales, Prada returned to pre-Covid-19 profitability levels in the second half of 2020. The recovery, however, was not sufficient to post a net profit for the full year, which was compromised by the decline in activity suffered in the first half of the year due to the outbreak of the pandemic.
The Italian luxury goods group noted that it has enjoyed an “encouraging start to 2021” despite ongoing Covid-19-related restrictions. It believes that the “fundamentals of the luxury sector remain strong” and that it is “well positioned to capture long term growth.”
In the full year, overall revenues totaled €2,423 million, down by 24 percent at constant currency rates. In the second part of the year, the decline narrowed to 8 percent and retail sales fully recovered in October and December compared to the same months of 2019.
Retail sales decreased by 18 percent at constant exchange rates in the full year to €2,115 million, with the fall narrowing to 6 percent in the second half. On average, 18 percent of the store network of the group were closed during 2020, with the percentage totaling 27 percent in the first half and 9 percent in the second half.
In Europe, full-year retail sales stood at €561 million, down by 35 percent in local currencies, due to the lack of tourists and extended lockdowns. About 30 percent of the group’s stores were closed throughout the year.
In Asia Pacific, excluding Japan, sales grew by 1 percent at constant exchange rates to €914 million. In the second half of the year, the top line surged by 19 percent, driven by Mainland China, up by 52 percent, Taiwan, up by 61 percent, and South Korea, up by 22 percent. In Japan, retail sales slumped by 28 percent in yen to €272 million due to the absence of tourists. But local consumption improved in the second part of the year.
In the Americas, revenues fell by 17 percent to €291 million in 2020, but increased by 4 percent in the second part of the year. In the Middle East, the top line contracted by 12 percent in local currencies to €78 million but jumped by 26 percent in the second half.
Retail sales were underpinned by the online channel, which more than tripled revenues over 2019.
By product category, sales of leathergoods fell by 19 percent in local currencies in 2020, with first-half revenues down by 31 percent and second-half sales down by 7 percent. Footwear suffered a 23 percent decline in the full year, with first-half sales down by 41 percent and second-half turnover down by 6 percent. Leathergoods represented 56 percent of the company’s full-year retail sales and shoes 17 percent.
By brand, Prada posted a 17 percent decline in retail sales in the full year, Miu Miu was down by 22 percent and Church’s down by 47 percent. The footwear brand was impacted by its strong exposure to Europe, where it generates about 80 percent of its sales. Prada represents 84 percent of the group’s sales, Miu Miu 14 percent and Church’s 1 percent.
The group had 633 directly-operated stores at the end of 2020, following 20 closures and 12 openings during the year.
In 2020, wholesale revenues were nearly halved at €275 million as Prada decided to reduce its exposure to the channel.
The group widened its gross margin slightly to 72.0 percent from 71.9 percent, while the Ebit margin narrowed to 0.8 percent from 9.5 percent. In the second half, Prada posted a positive Ebit of €216 million against a loss of €196 million in the first half.
The company posted a full-year net loss of €54 million, against a €256 million profit in 2019, but will use its distributable reserves to pay a dividend of 3.5 euro cents per share, for a total outlay of €90 million.