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.
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.