Prada bullish despite consumer slowdown fears

Luxury goods retailer reports 45pc increase in net income for 2012, and remains confident about sales amid plans to expand into new markets

PUBLISHED : Saturday, 06 April, 2013, 12:00am
UPDATED : Saturday, 06 April, 2013, 4:46am

Prada remains confident about its prospects this year, despite fears of poor consumer demand in Asia because of the weakening yen and Beijing's clampdown on lavish gift-giving.

The company said brand positioning and retail expansion will be key factors in 2013 even if the general economic environment remains challenging. Prada will proceed along a path of further investment in its retail network, it added.

Despite economic instability last year, Prada's net income increased 44.9 per cent from €431.9 million (HK$4.31 billion) in 2011 to €625.7 million last year.

"The group set new records in terms of revenue and earnings due to a sound equity and financial structure," said Patrizio Bertelli, chief executive of Prada.

The group set new records in terms of revenue and earnings due to a sound equity and financial structure
Patrizio Bertelli, chief executive of Prada

Retail represented 81.8 per cent of the group's consolidated net revenues compared to 77.9 per cent in 2011. Prada's directly operated stores sales generated revenues of €2.66 billion, a 35.6 per cent increase from 2011 owing to increased contributions from new and existing stores.

In 2012, Prada continued to enjoy healthy growth in Asia-Pacific where revenues increased by 32.9 per cent to €1.16 billion. Asia excluding Japan continues to be the leader with 36 per cent of sales, and 16 per cent and 15 per cent coming from Italy and the Americas respectively.

Leather goods continued to be Prada's main revenue source, registering revenue growth of 42.7 per cent. Clothing and footwear sales increased by 9.9 and 11.7 per cent respectively.

Prada expanded its network of directly operated stores to 461 last year, with 78 opening and five closing.

Prada opened 22 stores in Europe, with 15 opening in Asia excluding Japan.

The company said that it had expanded into markets in the Middle East and the Americas, opening 11 and 14 directly owned stores respectively last year.

According to Prada, this will strengthen the group's position in traditional markets and extend its presence to emerging countries.

The company's net financial position grew from €13.6 million as of February 1 last year to €312.6 million as of January this year due to strong cash flow generation, which funded capital expenditure and dividend payments to shareholders.

Prada's stock price, which more than doubled last year, is up 4 per cent this year, outperforming a 4 per cent fall in the Hang Sang Index.

"Prada represents a structural-growth story, supported by a strong store opening plan and compelling like-for-like growth, with substantial margin upside potential across both flagship brands, Prada and Miu Miu," Allegra Perry, an analyst at Cantor Fitzgerald who recommends buying Prada shares, wrote in a report last week.

Additional reporting by Bloomberg