Handbags, Cost-Cutting Drive Prada SpA Profits To Fivefold Gain in 2005
Prada SpA said Tuesday that growth across the board, in all its brands in all markets, coupled with cost-cutting helped propel the luxury group to a fivefold increase in net profits in 2005 on a 10 percent rise in sales.
MILAN — Prada SpA said Tuesday that growth across the board, in all its brands in all markets, coupled with cost-cutting helped propel the luxury group to a fivefold increase in net profits in 2005 on a 10 percent rise in sales.
Net profits rose to 47 million euros, or $58.5 million, on sales of 1.33 billion euros, or $1.66 billion. This compares with net profits of 9 million euros, or $11.2 million, the previous year. Prada did not give an exact sales number for its SpA company in 2004.
Prada SpA includes the Prada, Miu Miu, Car Shoe and Azzedine Alaïa labels. The 2005 figures do not take into account the Helmut Lang and Jil Sander brands' performances last year. Those two brands, sold earlier this year, fall under the ITMD Investments B.V. umbrella, which also controls Prada SpA. Change Capital Partners, based in London, acquired Jil Sander, and Link Theory Holdings Co. Ltd., Tokyo, bought Helmut Lang.
"I am pleased with our results in 2005 and our progress in the first half of this year," said Patrizio Bertelli, chairman and chief executive officer of Prada, in a statement. "Revenues grew in all our key markets, and we have improved profitability by increasing efficiency and controlling costs. We have focused on the core brands and the financial restructuring is well under way. We can now speed up our investment plans and leverage the strong momentum of all our brands worldwide."
Earnings before interest, taxes, depreciation and allowances grew 30 percent last year, to 201 million euros, or $250.3 million, and earnings before interest and taxes rose 74 percent, to 99 million euros, or $123.3 million, compared with 57 million euros, or $70.9 million, in 2004. Dollar figures were converted from the euro at average exchange rates for the respective periods.
A spokesman determined Prada SpA's debt was "below 700 million euros," or $871.8 million, to be reimbursed to four banks in "the medium term."
"Our focus is on profitability, which grew over the past year through an expanded offer of handbags and leather goods," said the spokesman. "We've developed our existing stores, increased the mix of products and our sell-through and improved the efficiency of our stock houses and our production systems."For example, production was redistributed across the 14 plants the company has in Italy to improve efficiency and cut costs. "The manufacture of the Linea Rossa label was extremely fragmented before, but now it's all in one plant in Ancona [in central Italy]," said the spokesman.
The company put a greater emphasis on its core leather goods division, which "grows more quickly and is more profitable," said the spokesman, noting Prada's focused advertising on those products.
"We also increased the displays and windows dedicated to bags within the stores," he said. "We were perceived more as a ready-to-wear company — surprising, if you think that we were founded in 1913 as an accessories company."
Leather goods and accessories accounted for 38 percent of total sales of the Prada brand and rtw and footwear accounted for 36 and 25 percent, respectively. The Prada brand continued to be the group's cash cow, generating sales of 1.12 billion euros, or $1.39 billion, last year.
At Prada SpA, rtw and leather goods each accounted for 36 percent of total sales, while footwear represented 27 percent of sales. The remaining 1 percent was derived from licenses.
Sales were distributed among Asia, the main market, with a 27 percent share; Italy, which accounted for 26 percent of sales, and Europe (excluding Italy) and the U.S., which accounted for 25 and 22 percent of sales, respectively.
Sales at Miu Miu, which the company has recently been building to give it greater visibility, grew 17 percent to 126 million euros, or $156.9 million. The brand grew 16 percent in Europe and 30 percent in the U.S. and the Asia Pacific market.
Car Shoe nearly tripled its revenues, to 17 million euros, or $21.2 million, in 2005, compared with 6.5 million euros, or $8.1 million, the previous year.
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