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Prada is losing its sheen in South Korea

There was a small speck in an otherwise rosy picture of luxury spending in East Asia when Prada reported earnings today, June 11.

“There is one single market which is obviously not doing well which is Korea,” Donatello Galli, chief financial officer of Prada, said in the company’s earnings call. Galli attributed the slowdown in South Korea, home to Asia’s fourth largest economy and one of the region’s most developed luxury markets,”to political and other issues.”

Prada’s sales in Asia Pacific grew faster than in any other region during the three months ended April 30. Sales at stores open for more than a year in greater China grew 9%, and in Japan, 11%. But for the region overall they grew only 6%, the firm said in the earnings call, dragged down by performance in Korea. (Prada did not break out results for Korea.)

South Korean spending has been sluggish since last year, in part because of a near confrontation with North Korea and a slowdown in exports. (That’s partially a result of a falling yen, which has boosted  Japanese exports over Korea’s.) Private consumption shrank 0.4% during the first quarter, and automobile and department-store sales have all fallen over the past few months, the government reported earlier this month.

Even after the Korean economy picks up again, it’s hard to say whether Prada’s sales will ever compare to those in China or other emerging markets. Well-to-do Korean shoppers are moving away from brands that show status towards smaller labels that express some kind of individuality. And made-in-Asia retailers like Couronne—a Korean maker of high-end handbags, shoes and other accessories—are starting to win more customers. The firm reported $40 million sales last year, comparable to European luxury brands like Berlutti, a shoemaker owned by LVMH. If these trends in South Korea continue elsewhere in Asia, Prada may start seeing more trouble spots.

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