PRDSY Prada Spa (PK)

By Manuela Mesco 

MILAN--Italian luxury house Prada SpA posted a 26% drop in net profit for the first nine months of its financial year, as it continued to struggle to get costs under control and reignite shopper interest.

In a set of results that revealed the formidable challenges still facing the Milan fashion house, Prada said net profit for the nine months to October 31 was EUR235 million ($258 million), down 26% on the year. Operating profit fell by a quarter to EUR374 million.

The firm has been struggling for more than a year to adapt to a slowdown in the once-hot Asian market and to revive the interest of shoppers who have moved away from big, established brands in favor of more exclusive, unique names.

Its problems have been compounded by spiraling operating expenses, which have continued to eat into profit margins.

Prada--which is listed in Hong Kong and controls the Miu Miu, Church's and Car Shoe brands--said Tuesday that the decline in profitability "was mainly due to the rising selling costs associated with the expansion of the retail network."

Currency fluctuations helped push Prada's revenues up 1.2% to EUR2.58 billion. But stripped of the currency effect, revenues would have fallen 7%, the company said. In the last quarter (August-October) alone, Prada's revenue fell 5.3% compared with the same period last year.

Sales of leather goods, one of the firm's core product categories, were down 3.8% at current exchange rates and nearly 12% at constant exchange rates.

Virtually all regions reported weak results for Prada. Sales in the Asia-Pacific area fell 6.3% on the year in current currency rates. If currency movements were stripped out, sales would have fallen 19%. Fewer purchases by local shoppers as well as lower tourist flows from mainland China depressed sales. In Europe, sales were down 2.4% compared with the previous year.

Japan was a rare bright spot, with sales up over 10%.

In a statement Tuesday, Prada said it has already started to contain costs and streamline the company to help improve profitability.

Write to Manuela Mesco at manuela.mesco@wsj.com

(END) Dow Jones Newswires

December 15, 2015 10:03 ET (15:03 GMT)

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