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Despite Tough Climate, Prada Staying Course

MILAN -- The Luna Rossa sailing team is no stranger to rough waters, and neither is Prada.<P>Prada is proceeding with plans for a summer initial public offering, even though luxury goods stocks are tanking on concerns about the U.S. economy and...

MILAN — The Luna Rossa sailing team is no stranger to rough waters, and neither is Prada.

Prada is proceeding with plans for a summer initial public offering, even though luxury goods stocks are tanking on concerns about the U.S. economy and sluggish retail sales. The company likely will have to offer investors a discount in such a climate, but analysts said it would probably be worse for Prada to suffer the embarrassment of postponing the offer yet again.

Analysts had seen Prada worth as much as $4.7 billion, but plunging share prices in the sector are seen pushing valuations down. One said Prada is now worth $2.83 billion to $3.78 billion. Dollar figures were converted from the euro at current exchange rates.

“Putting it off another time would not be a good signal,” said one analyst. “If [Prada] is convinced about what it is doing, it’s in its interest to do it now, even if it means less money than what they had hoped for.”

A Prada spokeswoman said the company is still shooting for its road show to start July 1, with trading slated to start in mid-July. It will be a crunch.

Prada has to make it in July before Italy packs up for vacation for the entire month of August. Meanwhile, a postponement to autumn could be tricky, as everyone expects chief executive officer Patrizio Bertelli to be preoccupied with prepping Luna Rossa for the upcoming America’s Cup race.

Market conditions are hardly soothing. Although luxury issues have held up better than much of the rest of the equity markets, in New York Stock Exchange trading on Friday, Gucci closed at $94.41, down $1.50, or 1.6 percent, for the day but 94.9 percent of the 52-week high of $99.45 it reached on May 22. On the Nasdaq, LVMH Moet Hennessy Louis Vuitton ended the day at $9.15, down 31 cents, or 3.3 percent, equal to 80.6 percent of its high for the past 52 weeks, $11.35, which it hit on May 28.

“If the sector falls by another 10 percent, they may have to put off the offer,” commented one market watcher. Prada could get cold feet when it gets more precise pricing information.

“I would find it normal if they postpone [the IPO], if we continue to have difficult markets,” said Matthieu Rosset, an analyst with Credit Lyonnais Securities Europe. “If they really need some fresh cash, they won’t postpone the IPO; if they want to maximize the value, there is still the possibility they could postpone.”

Prada does have its bills to pay. At the end of 2001, its debt pile stood close to $890 million.

Another analyst cautioned against making any hasty decision, as markets are volatile and difficult to predict.

“I wouldn’t be putting off the IPO because the sector has been off for a week or so,” he said. Prada needs to go public “sooner or later” and the stocks could just as easily recover next week, he said.”