MILAN — Defying the economic doldrums, Prada SpA continues to thrive.
Gains in its leather goods division and a strong performance in the Asia-Pacific region helped the luxury group report a jump in earnings and revenues in the nine months ended Oct. 31. Net profit surged 75 percent to 273.2 million euros, or $385.2 million, compared with 156.5 million euros, or $205 million, in the same period last year.
Sales at the firm, which made its debut on the Hong Kong Stock Exchange on June 24, gained 25 percent, totaling 1.73 billion euros, or $2.44 billion, compared with 1.38 billion euros, or $1.81 billion, in the first nine months last year.
Dollar amounts have been converted at average exchange for the periods to which they refer.
Prada also said that, effective Tuesday, long-standing chief operating officer Sebastian Suhl was exiting the company “to pursue other business opportunities,” and with “no disagreements with the board.” As Prada looks for a candidate to succeed Suhl, his duties will be taken over by the executive directors of the group.
In its overview of the nine-month period, Prada reiterated that retail sales helped boost the company’s performance, as its directly operated stores showed a 36 percent rise in sales to 1.33 billion euros, or $1.88 billion. On a like-for-like basis, retail sales grew 23 percent.
Investments in the period amounted to 178.1 million euros, or $251.1 million, largely covered by operating cash flow, and mainly dedicated to the expansion of the group’s retail network. In September, Prada said it planned to open 80 stores a year over the next three years.
“Whilst we will continue to closely monitor markets’ behavior, we remain confident in the strength of our brands as well as in the luxury market’s potential,” stated Patrizio Bertelli, chief executive officer. “We will continue to pursue our objective of long-term growth through our strategy focused on the geographic expansion of directly managed shops and the high quality of our products.”
Bertelli underscored how the group continues to grow revenues and profitability while improving operating margins.
In particular, the company noted a “sharp increase” in the third quarter compared with the first half of the year, as retail sales grew 39 percent in the three months.
In the nine months, earnings before interest, taxes, depreciation and amortization grew 47 percent to 486.5 million euros, or $686 million. Operating profit climbed 58 percent to 392.3 million euros, or $553.1 million.
The group controls the Prada and Miu Miu brands, which drove the growth in the period as both increased in excess of 25 percent, and the Church’s and Car Shoe labels.
Leather goods continued to be the group’s core business, accounting for 56 percent of total sales, and registering a 41 percent increase. The ready-to-wear and footwear categories also showed gains, up 3 percent and 14 percent, respectively.
All geographical areas showed double-digit growth. The Asia-Pacific region, the group’s main market with sales of 579.7 million euros, or $817.3 million, climbed 39 percent. Revenues in Europe grew 21 percent. Sales in the U.S. gained 19 percent, or 27 percent at constant exchange rate, while Japan posted a 12 percent increase.
In the third quarter, the group expanded in both high-growth luxury markets and in more established countries, where the retail network is still underpenetrated. Among the new openings, at the end of August, Prada and Miu Miu opened venues in Dubai at the Saks Fifth Avenue department store, the first for the brands in that region. Miu Miu opened its first banner in Barcelona in September. In the period, Miu Miu stores were opened in Tokyo and Guangzhou, where a Prada unit was also unveiled.
Looking ahead, Prada will open a boutique in Paris in January during Couture Week, on Rue du Faubourg Saint-Honoré.
During the first nine months, the group opened 51 stores, plus five more in the following weeks, increasing its retail network to 370 directly operated stores. Going forward, Prada aims to have about 550 directly operated stores by the end of 2013. At the end of 2013, Prada expects about half the new stores will be in Asia, with around 50 in China. Investments are also earmarked for Russia, the Gulf region and Latin America, which were previously served through franchising agreements.
As of Oct. 31, the group’s debt decreased to 110.1 million euros, or $155.2 million. As of July 31, net debt stood at 135.2 million euros, or $193.3 million, compared with 408.6 million euros, or $555.7 million, at the end of January. The company said it reduced debt through a capital increase of 206.6 million euros, or $295.4 million, reserved to the market and operations-driven free cash flow. Prada raised about $2.14 billion from the initial public offering, with a majority of shares coming from existing stock owned by Bertelli’s wife, designer Miuccia Prada, and others in the company. Another major shareholder was Italian bank Intesa Sanpaolo SpA, which sold 102.25 million shares of Prada, representing about 4 percent of the fashion firm’s capital upon the listing, retaining 25.6 million shares.
Prada shares closed up 3.05 percent at 35.50 Hong Kong dollars, or $4.55 at current exchange.
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