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Patrizio Bertelli and Miuccia Prada on Growth, Acquisitions and More

Those were among the topics discussed at the luxury group’s annual general meeting in Milan.

MILAN — No acquisitions, no European stock market listing and no Miu Miu show in Milan.

This story first appeared in the May 24, 2013 issue of WWD.  Subscribe Today.

Those were among the topics discussed by Prada Group chief executive officer Patrizio Bertelli and his wife, chairwoman and creative director Miuccia Prada, following the luxury group’s annual general meeting on Thursday at the company’s headquarters here. Last year, the event took place in Hong Kong, where the company is publicly listed, and Prada plans to alternate the meetings between the two cities.

“No, we are not going to launch an initial public offering on a European Bourse,” said Bertelli firmly, responding to a question that regularly resurfaces in Italy. “We want a streamlined company that brings advantages to shareholders and this would complicate its management. Hong Kong has different regulations — operating profit is what counts there, not EBITDA [earnings before interest, taxes, depreciation and amortization], and operating profit is the real result, it’s the bottom line that matters. A mental change would be needed here.”

Not seeing the listing as merely a financial tool, he added that he wants to “develop the company. We’ve seen too many companies that went public ending badly.”

Following Giorgio Armani’s remarks last week in which he urged brands that show outside Milan to return to Italy’s fashion capital, Bertelli said “a temporal issue” is behind the reasons for Miu Miu showing in Paris. “Miuccia is in the studio day in and day out and into the night. She creates the shows and follows every aspect, it is materially impossible to create two shows a couple of days apart,” he said.

“It’s the way we work, it’s impossible, nobody does it,” concurred Miuccia Prada, wearing a lightweight denim Miu Miu coat over a white shirt and black lace-trimmed skirt.

“If there were another show a week later, she’d go there,” joked Bertelli. “I look to the future. I was obliged to take part [in the new Chamber projects], the Camera has worked well and Valentino and Renzo Rosso’s brands don’t show in Milan, either. One must not be rigid, but have an expanded vision of things.”

In response to a question about possible acquisitions, Bertelli said the company does not want “any distraction.”

His management focus and Prada’s creativity have helped sustain the group’s growth. On Thursday, shareholders approved a dividend of 0.9 euros, or $1.10 at current exchange, to be paid on June 20 for a total of more than 230 million euros, or $296.8 million.

In the fiscal year ended Jan. 31, Prada saw a 44.9 percent increase in net profit to 625.7 million euros, or $800.9 million at average exchange, on a 29 percent gain in revenues to 3.29 billion euros, or $4.24 billion. First-quarter results will be released June 11.

“We dedicate a lot of time to understand markets, and at the basis there is Miuccia’s work in creating product, which has an identity,” said Bertelli when asked to provide a reason for the ongoing success of the company.

As the company is in a blackout period, executive director and deputy chairman Carlo Mazzi did not provide information on the first quarter of the year, but conceded he was “confident the strategy consistently deployed will be a key success factor in 2013 despite the business environment,” and barring “a disastrous market.”

Bertelli confirmed 70 to 80 store openings in the year, including 10 to 12 in China. Despite the new government’s anticorruption regulations, Prada did “not suffer” in China, said Bertelli. “This affects more those companies that make jewels and watches,” he said. There are currently 20 stores in China. “There is a lot of room to grow, we are halfway compared with others that started there earlier, but we’ve avoided mistakes. We’ll be at the level of our competitors in three years,” added the executive.

Bertelli said the U.S. and Japan have generally shown significant signs of recovery, and for different reasons. “In the U.S., the State’s decision to facilitate the work of industries within, with fiscal and economic interventions, have helped companies that used to produce in China or Vietnam, for example, to return to the U.S.

“In Japan, the new currency devaluation has made products more interesting and results are already very positive, after 10 years of a stagnant market. Evidently, all this conditions the companies in our sector both in a positive and negative way,” said Bertelli. “The luxury market has not been hit by serious situations,” he noted, although pointing to markets that are “in continuous evolution,” and difficulties at times to “manage masses of tourists.” Geopolitical conditions and the stock markets contribute to the influence on tourists’ decisions, as tourists are increasingly more educated.

The executive referred to Italy’s new government and its efforts to jump-start economic growth through the employment of the younger generation. However, Bertelli said training should be the first step. “Italy is the biggest luxury producer, it should be safeguarded,” he said. Prada’s own training spans over “at least eight years.”

Given the significant global expansion of the luxury market and the potential of countries such as China, the Middle East, Brazil and Russia, “companies that will want to become international must manage everything in an integrated way, from logistics to distribution, it’s fundamental.”

Bertelli touted Prada’s early steps in building a structure in the Nineties that would help it to expand internationally. “We now see the results. It seemed like an exceptional expansion, but it was a winning move. Dimension is pivotal, those companies that are too small won’t manage. Nobody could imagine this growth at the end of the Nineties and another 10 years of strong growth are forecast,” said Bertelli, pointing to Central America, Panama, Caribbean, Venezuela, Brazil and Africa, “which is starting to give the first signs in our sector,” as relevant areas for the future. Prada will “probably” open a store in Angola next year.

Responding to a question about e-commerce and the Internet, Miuccia Prada said it was a “complex” topic. “The Internet is incredible, it’s a very powerful and delicate issue. You promote the company, rather than selling products, you have the entire world looking at you but you know nothing of them. And if [the content] is too sophisticated, people don’t appreciate it, it seems that more basic things are appreciated more,” said the designer. Her husband concurred, saying that the medium is “strong,” especially in the U.S., and that it will be “fruitful” in time, despite the complexity in terms of logistics and language, for example. Bertelli had a bone to pick with selling online, though. “We can’t [understand] how you can return something that you’ve worn after 30 days, and this is allowed by the law.”

The first part of a prestigious brick-and-mortar Prada boutique will open in Milan’s Galleria Vittorio Emanuele II by the end of June. The annual report states that the premises, which will also be open to Prada’s art foundation, are granted by the municipality under an 18-year concession.

Also, the report cites changes in the net book value of property, plant and equipment, additions amounting to 35.4 million euros, or $45.3 million, including the purchase of commercial and industrial properties. In the historic center of Florence, the group acquired the ground floor and basement of a 15th-century building where the main Prada store was already operating under a lease agreement. The group has also invested in industrial facilities in the northeast of Italy.

Capital expenditure in the retail channel in the year amounted to 265 million euros, or $339.2 million, and included 191 million euros, or $244.5 million, invested in new opened stores.

As per the report, Prada and Bertelli continue to work under consultancy agreements, which were renewed on April 26 last year, taking effect from Feb. 1, 2012, for a term of three years. Prada receives a yearly fee of 9.7 million euros, or $12.5 million at current exchange, and Bertelli is paid 10 million euros, or $12.9 million. The amounts have not varied since two years ago, when these figures were revealed in a filing via the Hong Kong Stock Exchange Web site at the time of the IPO.

As of Jan. 31, 79.98 percent of the share capital was owned by Prada Holding BV, a company in The Netherlands, while the remaining shares were listed on the Hong Kong Stock Exchange.