Prada’s Turnaround Recipe Includes Cheaper Bags and Online Push


prada milanoPrada SpA, the struggling Italian luxury-goods maker listed in Hong Kong, plans to introduce more lower-priced handbags and double its online business as it seeks to reverse two years of stagnant sales. The Milan-based company will also close stores and narrow the spread on prices of new products between regions to about 10 percent, Strategic Marketing Director Stefano Cantino said in an investor presentation Monday in New York. Prada needs to kick-start growth after posting its lowest profit in five years. While all luxury-goods companies have been hurt by collapsing demand in China, the strong dollar and the terrorist attacks in Europe, the Italian company has been hit harder than most. That’s partly because its handbags are too expensive and it’s been too slow to invest online, according to Sanford C. Bernstein analysts. “We are working deeply to really fill all the price ranges,” Cantino said of Prada’s plans to introduce more bags costing between 1,200 euros ($1,370) and 1,400 euros. “There is strong demand for newness.” Prada plans to double its e-commerce sales over the next two years by increasing the number of categories it offers online, particularly shoes, and expanding its social media activities, Cantino said. Prada doesn’t plan to sell clothing over the Internet, preferring instead to direct consumers to the company’s 618 stores, he said. It will be on Snapchat Inc. by October, the executive said. “I don’t like the word luxury,” said Chairman Carlo Mazzi. “Value for money is our strategy for the future.” Prada co-Chief Executive Officer Patrizio Bertelli didn’t speak on the call. The shares closed down 7.6 percent to $HK23.70 in Hong Kong, extending their decline in the past year to 47 percent.

By Andrew Roberts