MILAN — Patrizio Bertelli was in typically outspoken form Thursday.
As Prada SpA reported a 72.2 percent jump in net profits in the year ended Jan. 31, its chief appeared at a two-hour live-streamed conference with analysts in which he outlined aggressive expansion plans — and talked about everything from Dubai to the underappreciation of the fashion industry in Italy. It was the first time Bertelli took questions from analysts since Prada did its initial public offering in Hong Kong last summer.
One of the key focuses was Miu Miu, which Bertelli said he sees eventually doubling in size to sales of almost $1 billion annually.
But it was perhaps Bertelli’s comments about non-Prada matters that stirred the most interest. He used the opportunity to take a jab at the fact that, once again in a tough Italian economy, the government fails to financially support the fashion industry. Instead, he said, attention is entirely focused on what he called “metal mechanics.”
Bertelli also shot back at those who criticized the company’s decision to list in Hong Kong rather than Milan, pointing to an article in Corriere della Sera three days before that said the capitalization of Apple Inc. was the same as the first 60 companies listed on the Milan exchange. “So this is certainly a negative image for Italy because there are many, many companies that are family owned like we used to be recently,” he said.
In such a tough economy, he said, “only the best brands have a better chance to improve.” Donatello Galli, administration and finance director, said during the meeting that he saw “a positive environment around us, with February and March in line, even better.”
Bertelli described 2012 as Prada’s “best ever year,” saying, “What has been achieved so far with drive and commitment will form the basis for further growth in future. We will aim to consolidate the group’s position as a leading luxury goods business on all international markets and will continue to draw on innovation, quality and respect for tradition.”
Prada could grow at an even faster pace to compete for prime locations in China, but Bertelli cautioned against urgency. “We must be careful, take a close look, work on the market, before making simplistic statements.”
Bertelli was all for being “concrete,” challenging predictions about the growth of the market that often turn out to be wrong. “In 2003 or 2004, nobody thought that luxury goods would grow so much,” citing the “No Logo” book by Naomi Klein. “Had she lived in the 14th century, she’d end up burned like a witch because of all these silly things she wrote. I mean, she was hugely popular with the book and then everything that happened was the opposite. I don’t want to be provocative, but concrete. No one has a full understanding of future,” he explained.
“So, we shouldn’t really get hung on our conventional thinking,” Bertelli continued. “We have to be open-minded. I’m trying to take a snapshot of the current situation. I don’t want to be polemical. I don’t want to be controversial, but I do think that this company is a really good employer for lots of people so I also believe we are doing our role in terms of our role in the society in Italy.”
Both Bertelli and Galli were “confident that the market is there, with all these openings” in the pipeline.
After 75 openings in 2011, they confirmed an average of 80 a year in both 2012 and 2013. In 2012, 50 percent of openings are planned in “fast-growing markets” such as China, other Asian countries, the Middle East, Brazil and Morocco. Nearly 40 percent of 2012 openings are planned for Miu Miu.
Galli said the company is “heavily investing in promotion for Miu Miu, it’s set to become much bigger,” and cited special events, such as the fashion show held last year in Shanghai. “It will grow probably faster than Prada, we want to double sales to 750 million euros [$999.3 million],” said Galli, although a time frame was not specified. “We are investing in Miu Miu, the level is comparable to Prada.”
For the year ended Jan. 31, the company reported net profit climbed to 431.9 million euros, or $600.3 million, compared with 250.8 million euros, or $331 million, in the same period the year before. Boosted by a 40.7 percent jump in sales of leather goods, Prada saw revenues rise 24.9 percent to 2.55 billion euros, or $3.54 million, last year compared with 2.04 billion euros, or $2.69 billion, a year earlier.
Earnings per share rose from 0.10 to 0.17 euros, or from 13 cents to 22 cents at current exchange, and the board proposed a dividend of 0.05 euros, or 6 cents a share, a total of 130 million euros, or $173.2 million, to be paid in the first week of July, said Galli.
Dollar amounts have been converted at average exchange for the periods to which they refer.
Earnings before interest, taxes, depreciation and amortization (EBITDA) rose 41.7 percent to 759.3 million euros, or $1.05 billion. Operating profit grew 50.3 percent to 628.9 million euros, or $874.1 million.
Bertelli said the company’s approach to business can help “improve gross margin farther, through retail sales and higher industrial efficiency.”
Sales grew in all markets globally, but the Asia-Pacific region showed a 42.2 percent increase, reaching sales of 873 million euros, or $1.21 billion, confirming its growing importance to the luxury goods firm since it accounted for 34.6 percent of total revenues.
Revenues in the region were almost entirely generated by the group’s retail network, which totaled 115 directly operated stores at the end of January. Eight of the 18 new stores opened in the Asia-Pacific area are located in China.
Other markets also performed well: Europe was up 16.8 percent, which the company attributed to more travelers from the Far East shopping there; the U.S. rose 20.2 percent (or 26.1 percent at constant exchange rates), and Japan 16.2 percent. The group opened 75 stores in 2011 in 17 different countries, including Russia and the United Arab Emirates, which Prada entered last year for the first time.
But the company continued to expand in the U.S. and Europe as well, with two-thirds of new stores opening in those markets. “We don’t consider these mature markets because of the flow of travelers,” said Galli. The U.S., where there are 47 stores, showed a 25 percent increase in retail sales.
As of Jan. 31, the group counted 388 directly operated stores.
Last year’s figures show the increasing importance of Prada’s own store network, which represented 77.9 percent of total revenues. Sales in Prada group’s own stores rose 37.6 percent last year. The Prada and Miu Miu brands each grew around 25 percent.
In terms of categories, leather goods remains the company’s core business, accounting for more than 56 percent of sales. Responding to an analyst, Bertelli said growing this category is “easier,” being size-less. Footwear and ready-to-wear, he said, are more diverse and target countries with different lifestyle habits, culture, fits and traditions. “There are more industrial challenges to suit different market needs. But the margins we have on footwear and apparel show we are working very hard on these categories,” said Bertelli, noting how women in Dubai wear mainly dresses and no T-shirts, for example. He contrasted Dubai women to the Japanese and their “minimal taste.”
The executive continued: “We should not rely on leather goods only, we want to be strong and sell all individual components and to grow in absolute terms.”
Clothing and footwear sales rose 6 percent and 11.3 percent, respectively.
Capital expenditures last year were 191 million euros, or $265.5 million, for retail, mainly dedicated to openings, and 88 million euros, or $122.3 million, for the industrial part of the business.
The IPO and the high level of operating cash flow enabled the group to finance its capital investment during the year and achieve a positive net financial position of 15.8 million euros, or $21.9 million as of Jan. 31.
Prada also pointed to its long-standing commitment to the arts, its Fondazione Prada, which last year inaugurated the Ca’ Corner della Regina, an historic building on the Grand Canal in Venice, as its new exhibition space.
Last year, the group also said it planned to once again support Luna Rossa in its challenge for the 34th edition of the America’s Cup in 2013.
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