Bloomberg News

Prada Confident for Year as Quarterly Profit Beats Estimates

November 30, 2011

(Updates with shares in fifth paragraph.)

Nov. 29 (Bloomberg) -- Prada SpA reported third-quarter profit that beat some analysts’ estimates and said it’s confident of maintaining growth over the year as demand for its luxury shoes and apparel shows no sign of slowing.

Net income rose 75 percent to 93.6 million euros ($125 million) in the three months ended Oct. 31, compared with the year-earlier period, the Milan-based luxury-goods maker said today on its website. The average of two analysts’ estimates compiled by Bloomberg was for profit of 89.9 million euros. Revenue advanced 33 percent to 596.1 million euros.

Prada, which in June sold shares in Hong Kong’s biggest initial public offering this year, plans to open about 80 stores annually over three years as Asian shoppers splurge on leather handbags and other luxury items. The owner of the Prada, Miu Miu, Church’s and Car Shoe brands is confident of the Asian market, Deputy Chairman Carlo Mazzi said in September. Personal luxury-goods sales may rise 12 percent in the Asia-Pacific region in 2011, excluding currency swings, Bain & Co. estimates.

“We have no signs regarding any decrease in demand for our products,” Mazzi said today by phone. While it’s necessary to be prudent amid economic difficulties, “we are confident to maintain the same level for the full year,” he said.

Prada rose 3.1 percent to HK$35.45 at the 4 p.m. close of trading in Hong Kong today. The earnings were released after markets closed. The shares have fallen 10 percent since the June IPO, while LVMH Moet Hennessy Louis Vuitton SA has declined 4.5 percent and Cie. Financiere Richemont SA has slid 11 percent.

Sales Growth

Prada follows rivals including LVMH and PPR SA in predicting sustained demand for luxury items amid Europe’s sovereign-debt crisis. Burberry Group Plc’s Chief Executive Officer Angela Ahrendts said this month the British company can weather any fallout by focusing on wealthy clients in cities such as New York and Hong Kong. Still, Tiffany & Co., the luxury jewelry retailer, said today that sales growth will slow to the “low-teens” in percentage terms in the fourth quarter.

Prada said the pattern of retail sales in November is in line with previous months. Retail sales climbed 39 percent in the quarter and 36 percent in the nine months through October, the 98-year-old company said. While Prada is ready to react to defend profitability, “we remain highly confident about the potential of the luxury market,” it said.

Third-quarter sales rose 50 percent in the Greater China region, including Hong Kong and Macau, and 45 percent in the Far East, Prada said. Europe and Italy, where sales grew 33 percent and 27 percent, respectively, are still performing “quite well,” Finance Director Donatello Galli said on a conference call. North American sales increased 24 percent.

Revenue growth accelerated at all brands in the third quarter from the first half, except at shoemaker Church’s, which slowed to an 8 percent increase. Sales at the Prada brand, which accounts for 79 percent of overall revenue, grew 36 percent, while Miu Miu sales gained 26 percent.

--Editor: Paul Jarvis, Thomas Mulier

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net


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