Despite Worries over Luxury Spending, Prada Q3 Profit Leaps 75%

Resort look from Prada

Milan and Hong Kong—Prada Spa said Tuesday that it posted a 75% jump in its third quarter sales as demand from affluent shoppers increased in its Prada and Miu Miu brands.

The strong performance—along with similar positive reports from other luxurygoods leaders such as LVMH and PPR—seemed to fly in the face of retail analysts who predict the uncertain global economic picture may cloud sales even in the high end.

For the quarter ended Oct. 31, the Italian luxurygoods company, which launched its IPO in June in the Stock Market of Hong Kong, reported a net profit of 93.6 million euros (about $125 million) ahead of analysts’ average estimate for 89.9 million euros.

Net sales increased 33% to 596.1 million euros ($795.7 million) with its Prada and Miu Miu brands leading growth with increases of more than 25%.

Leathergoods Account for Over 56% of Total Sales

“All geographical areas recorded growth rates in double figures, with Asia Pacific reconfirming itself as the principle market,” said the company which raised $2.6 billion in its IPO, the largest in Hong Kong this year.

The Greater China region, which includes Hong Kong and Macau, posted a 50% increase, with 45% increase in the Far East. Sales in Europe increased 21% and 19% in the United States (27% increase at constant exchange rates) while Japan increased 12%.

Prada said all categories contributed to the sales increases led by leathergoods that “grew 41% and now account for over 56% of consolidated sales.” Sales of ready-to-wear increased 3% and footwear rose 14%.

“Once again during the quarter we achieved very strong results in terms of sales and profitability, which confirm the group’s ability to sustain high growth rates while improving operating margins,” said Patrizio Bertelli, Prada’s ceo. “While we will continue to closely monitor markets’ behavior, we remain confident in the strength of our brads as well as in the luxury market’s potential.”

To that end Prada is continuing to expand its own direct-operated retail stores which now number about 370. Another 80 stores are planned in Asia over the next three years.

‘We have been Immune So Far’

The company’s emphasis on Asia may be a buffer against any economic turmoil in Western nations, especially the Eurozone, that could affect luxurygoods sales.

When asked about such fears in a conference call with analysts, Carlo Mazzi, deputy chairman, brushed off concerns saying “while it’s necessary to be prudent amid economic difficulties, we are confident to maintain the same level for the full year.”

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

Pressed about what efforts the company is undertaking to avoid risk should a luxury downturn materialize, Mazzi said the company had turned down offers for “interesting” acquisitions that would have required it to seek additional financing.

 

 

 

 

 

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