MILAN — Prada Group touted double-digit sales jumps for its Prada and Miu Miu brands but travails at Jil Sander and Helmut Lang and write-downs caused the company to post a loss of 62 million euros, or $77.5 million in 2004.
Prada reported the loss for the 13 months ended January 31. Prada is shifting its fiscal year to end in January, creating a 13-month year for 2004. Sales for the period totaled 1.46 billion euros, or $1.83 billion. The company said that revenue rose more than 6 percent for the comparative twelve-month period, stripping out the negative effect of exchange rates.
“Sales are going well in the whole world, we are just continuing to restructure, which we’ve been doing for a while,” Prada chief executive officer Patrizio Bertelli told WWD in a phone interview.
(Dollar figures are converted from the euro at average exchange rates for the period to which they refer.)
Prada’s 2005 looks brighter. Increasing revenue from Prada and Miu Miu, along with restructuring efforts at Jil Sander and Helmut Lang, will “soon restore satisfactory levels of profitability” for the group, the company said in a statement.
The company boasted strong first-quarter retail sales and noted that fall-winter orders are higher than those a year ago.
In 2004, losses and write-downs at Jil Sander and Helmut Lang amounted to 73 million euros, or $91.3 million. A company spokesman said that the firm is taking a “conservative approach” to its balance sheet and chose to write-down the value of certain assets rather than boost its bottom line.
In another move that contributed to Prada’s loss, the company wrote-down the value of some properties and assets linked to its Prada and Miu Miu brands. These write-downs and extraordinary provisions came to about 50 million euros, or $62.5 million, bringing the total amount of losses and write-downs at all the Prada brands to 123 million euros, or $153.8 million. A spokesman attributed part of those write-downs to the unfavorable exchange rate environment.
As reported, Prada is restructuring its money-losing Jil Sander division and mulling the future of its Helmut Lang business. Last week, Prada tapped men’s wear designer Raf Simons as creative director at Jil Sander and the Italian company is moving the remainder of Jil Sander’s production from Germany to Italy to better exploit synergies between Prada Group brands.
This story first appeared in the May 31, 2005 issue of WWD. Subscribe Today.
“The structural costs were too high for the sales volume at Jil Sander,” Bertelli said, adding that there are no current plans to close stores at the brand because the company is focusing first on industrial cost-cutting before reviewing the retail strategy.
Bertelli described the Simons appointment as a “well-planned move.” He foresees an evolution of the label’s aesthetic and image rather than a “total transformation.”
“I think that the market interpreted it in a positive way,” he said.
As for Helmut Lang, Prada is talking to prospective buyers and deciding whether or not to sell the business. Prada is planning to shutter Helmut Lang stores in New York, Paris and Milan. Those closures, along with the dismantling of Helmut Lang’s SoHo space, are drastically reducing costs for the label. Bertelli reiterated remarks he made earlier this month to WWD that Prada plans to fill orders and manufacture it until the end of the year at which point he’ll decide whether to sell.
“We’re continuing to produce it for winter,” Bertelli said.
Prada’s results indicated double-digit sales increases for its core Prada and Miu Miu brands, which together account for 85 percent of group revenue. Prada said that the two brands stayed profitable despite the unfavorable exchange rate.
The company presented all of its revenue growth figures on a comparative 12-month basis and at constant currency rates.
Prada and Miu Miu sales of ready-to-wear advanced 18 percent, while those of leather goods rose 13 percent.
On a geographic basis, Prada and Miu Miu sales in Asia grew 25 percent, while those in the United States increased 14 percent. Prada specified that Prada-brand retail sales in the U.S. advanced 22 percent. The company said that revenue also increased in markets like Japan, Italy and the rest of Europe despite weak consumer spending in European countries.
“During 2004 , Prada presented strong handbags, shoes and ready-to-wear collections which were very well received by both the trade and the press,” the company said in a release. Prada also noted particularly swift sales of its newly launched fragrance in the United States and the U.K.
Prada declined to release debt figures. Net financial debt stood at 675 million euros, or $762.75 million, at the end of 2003. The company had set a goal to reduce its debts to under 300 million euros, or $375 million, by the end of 2004.
On top of those debts, ITMD Investments B.V., the company that controls Prada, has to reimburse 700 million euros, or $878.99 million, worth of bonds next month.