Prada has decided to further reduce its wholesale business to control its pricing policy better as it seeks to erase markdowns in its directly operated stores. The group said that the move is “essential to ensure greater consistency in pricing policies” in physical stores and online. This will enable it also to further boost the value of its brands and to ensure sustainable long-term growth, it pointed out.
The group did not elaborate on how the measure would be carried out, but according to Pambianco, third-party e-tailers may be the most severely affected wholesale clients. We see this as an effort to cut down on their online promotions while the group develops its own e-commerce capabilities under the management of Lorenzo Bertelli, son of the group's chief executive, Patrizio Bertelli.
In 2018, Prada's retail sales grew by 7 percent to €2,558 million, with reduced markdowns and a strong double-digit increase in e-commerce. Conversely, wholesale revenues stood at €566 million, representing 18 percent of overall sales. The segment's growth was flat on a reported basis and up by 1 percent at constant currency rates. The division's sales were driven by e-tailers, while the group continued to prune its wholesale accounts especially in Europe.
Prior to the announcement, which followed a board meeting, an Italian investment broker, Equita, was expecting the group's wholesale revenue to rise by 2 percent this year at constant currency rates. It now anticipates that Prada will be more aggressive in selecting wholesale partners and that the trend in wholesale revenues could end up being negative in 2019.