MILAN — Three weeks after the decision to postpone Prada Group’s IPO for the third time, Prada chief Patrizio Bertelli says he has no regrets.
"Our choice was correct, and we haven’t had second thoughts," said Bertelli in an exclusive interview Thursday. "The Italian stock market has lost 8 percent since then, and I think many investors are in a wait-and-see mood now."
Bertelli, who was joined by chief financial officer Riccardo Stilli, looked relaxed in his minimalist black-and-white office, wearing a cool white shirt and beige suit. Bertelli said it was hard to put a real value to any stock share at the moment, and that too many shares were underestimated by the market. He added that scandals like Enron and WorldCom have caused investors to "lose faith" instocks and perhaps invest in other areas, such as real estate. "It’s a system that must find a new balance," he said.
Bertelli felt he was not in the position to judge the reasons behind the weakening of the dollar against the euro (the euro closed at 99.2 cents on Thursday ): "Let’s leave that to the economists," he said, "though I suspect politics and investments have a lot to do with it."
Although downplaying the effects of a favorable euro exchange rate for the group, Bertelli did not deny that a stronger euro could cause problems for those companies that export a lot to the U.S.
"And let’s not forget that Italian tourism and sales in Italian boutiques are surely affected by a weaker dollar, as well," he said.
Although Bertelli said the company was not planning to raise its prices in the U.S. in the upcoming months, as a consequence of a weakening dollar, he said it had already raised its prices between 5 and 10 percent in the last six months globally. "I believe the data about the inflation supplied by state survey organizations might not fully reflect the real inflation increases here," said Bertelli, adding that the price increase did not have any impact on sales. "I imagine consumers realized it was a legitimate decision."
Bertelli said Prada and Miu Miu sales in the U.S. have risen 15 percent in company-owned stores since January, and that sales through independent American stores are up more than 20 percent.Sales, however, are increasingly influenced by outside events, he added.
"Due to a tense international atmosphere, we see dramatic drops, even as much as 30 percent, on those days close to significant national holidays, like July 4, or political crisis, such as the day after the attack on French president Jacques Chirac," said Bertelli.
Stilli said the group’s imports were not affected by the dollar-euro exchange rate: "We don’t buy raw materials in any area that uses American currency."
While last week Versace admitted in these columns it planned to cut its advertising budget in the second quarter, Bertelli said he did not plan any changes for the period, although he admitted it was a moment that called for caution."Each company has its history and background, so it’s a very subjective decision," he said. However, Stilli said earlier in the year, Prada Group was focused on cutting costs and had globally reduced its general expenses, such as labor costs, by 5 percent for all of 2002.
"It’s about rationalizing expenses and making use of synergies," said Bertelli.
Stilli said the group spends more than 5.5 percent of consolidated sales in communication each year. Last year, that was around $100.9 million. Group sales in 2001 were $1.744 billion. Dollar figures are converted from euros at current exchange rate.
Bertelli said that, with the same budget, the group was offered more ad pages, because many publishing houses are currently offering discounts. "We get more exposure for the same price," he said.
Another big image vehicle for Prada has been the Luna Rossa yacht racing fleet. This year, Bertelli sold the organization that manages the Luna Rossa boats to Maestrale Holding SrL, wholly owned by the Prada family, but Prada Group investments in this sponsorship were budgeted three years ago, at a cost of $37.3 million from 2000 to 2003. Luna Rossa will compete in the America’s Cup races later this year, and Bertelli will leave for New Zealand at the end of September.
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