Prada confident on 2011 despite global woes

Friday, 2 December 2011 00:00 -     - {{hitsCtrl.values.hits}}

MILAN/HONG KONG (Reuters): Italian fashion house Prada on Tuesday sounded a confident note about profit for the rest of the year while acknowledging even its wealthy customers might feel the pinch from economic downturn.

Milan-based Prada, which raised about $2.5 billion in June in the biggest IPO in Hong Kong this year, said it was minimising financial risks by passing up interesting acquisition opportunities.

Its net net profit rose 75 percent to 93.6 million euros in the three months ending in October, helped by Asia, its main market.

Sales of Prada’s leather bags and trend-setting clothes increased in November in line with the past months, confirming the resilience of the luxury industry despite the euro zone’s debt crisis threatening the global economy.

“We are in a niche market, that caters to the affluent, so we have been immune so far,” Deputy Chairman Carlo Mazzi told Reuters.

“We are confident we can confirm results in terms of margins for the rest of the year,” Mazzi said in a phone interview after the results.

“However, we are necessarily cautious about giving triumphant predictions. If the current economic trends remain so difficult, also the wealthy will start to feel the pinch,” Mazzi said.

Net revenues in the third quarter rose 33 percent to 596 million euros ($795.7 million), with Prada and Miu Miu brands leading growth.

The number of directly-operated stores reached 370 as compared with 345 at end-June.

Mazzi said the group would consider opening stores in markets where it is not yet present like Brazil, one of the world’s biggest emerging luxury markets.

Prada said it was ready to react to global market woes to defend profitability and growth perspectives.

Asked about which protective measures the group was taking to insulate itself from financial risks, Mazzi said he had declined recent proposals for “interesting” acquisitions, because these would have required access to financing.

Prada in September posted a 74 percent rise in six-month profit to the end of July and said it would stick to its plan for opening new retail outlets. Prada shares were up 3.05 percent on Tuesday prior to the release of the earnings statement, outperforming a 1.21 percent gain in the broader market. Shares in Prada have lost 10 percent since its flotation.

Shares in luxury shoemaker Salvatore Ferragamo, which floated in Milan in June, have gained 16 percent.

Concerns that luxury demand could wane hit the shares of some companies in September, but Burberry Plc and LVMH Moët Hennessy Louis Vuitton SA have since released optimistic outlooks. Germany’s Hugo Boss AG also revised up its sales targets.

CLSA Asia Pacific Markets estimates Greater Chinese demand is expected to account for 44 percent of the global luxury goods market by 2020.