According to Bloomberg, Prada shares tumbled to their lowest since 2016, as stifled Chinese spending played a huge role in the surprising nosedive of the Italian fashion giant’s yearly profit.
![A slump in demand from Chinese luxury buyers has led to an $864m slump for Prada](https://20627419.fs1.hubspotusercontent-na1.net/hub/20627419/hubfs/The%20Hustle/Assets/Images/171937524-brief_2019-03-19T012100.344Z-1.webp?width=595&height=400&name=171937524-brief_2019-03-19T012100.344Z-1.webp)
The famed luxury group attributed its fall in Asia to Chinese tourists spending less because of the current weakness in the yuan, as Prada’s disappointing earnings call knocked $864m off the company’s market value.
The power of Chinese consumers
The fashion industry has leaned heavily on Chinese consumers in the past, with China buying up 30% of the $1T in global luxury spending.
But, in the midst of a trade war with the US, not to mention the country’s slowest economic expansion in almost 3 decades, Chinese consumers have turned more conservative when it comes to luxury shop-athons.
While cars and iPhones have taken bigger hits thus far, Prada’s results have ignited worry that China’s newly wealthy middle class is curbing splurge purchases.
Pra-duhhh a $42k handbag is too expensive
Prada has seen its earnings tumble for 4 straight years, falling more than 50% since its 2014 peak as the group raised handbag prices and took too long to come up with a product to follow up on its best-selling Galleria line.
That said, its revenue has resumed growth after Prada released new handbags like the more affordable $3k Sidonie shoulder bag — but the marketing costs to reignite interest have been steep.