Milan—Prada SpA reported Friday that its full year profit jumped 45% thanks to its sales strength in Asia. However, Patrizio Bertelli, chief executive, noted that this year “our major focus will be on the Gulf area, South America, and U.S. department stores.”
While Prada sells more than a third of all its merchandise in Asia, the company still has room to grown in emerging markets where it has a smaller presence than some of its luxurygoods rivals. The company currently has 196 stores in Asia, including Japan, and 185 in Europe with just five in South America and 11 in the Middle East, 9 of which opened in 2012.
By reducing discount sales and entering new market, Prada can maintain its appeal, Bertelli said. “We don’t want to glut the market with our products.”
For the year ended Jan. 31, Prada posted net income of 625.7 million euros (about $811 million). Its fourth quarter profit gained 37% to 217 million euros.
As previously reported, Prada’s net revenue reached 3.3 billion euros (about $4.4 billion), beating analysts’ average estimate for 3.31 billion euros. Excluding currency fluctuations, sales were up 23%.
Double-digit growth was achieved on all markets but the largest being Asia Pacific where revenues increased by 32.9% compared to 2011 (+22.7% at constant exchange rates) to reach 1,160.2 million euros.
The increase achieved in Europe, an increase of 28.6% (+27.2% at constant exchange rates) was also very significant. Healthy growth rates were also recorded on other markets: the Americas, up 23.3%, (at constant exchange rates +14.8%) and even Japan which remains a solid market with a 14.2% increase (+ 7.9% at constant exchange rates).
Wholesale revenue was up 6% to 592.2 million despite a decline in outlets. Sales at Prada’s own stores increased 29%.
‘Risk of Volatility in Tourist Flows” to Europe, Asia
However, retail sales, which now account for 82% of total revenue. Comparable store sales were up 14% in line with the company’s forecast for a mid-teens percentage increase.
All of the Prada Group’s brands and product categories performed well. Leathergoods registered revenue growth of 42.7%, apparel was up 9.9% and footwear increased by 11.7%.
Bertelli said: “The year 2012 saw the Group set new records in terms of revenues and earnings. Based on these results and a sound equity and financial structure, we will proceed along our path of growth with further investment on retail network expansion, confident that, general economic uncertainty notwithstanding, the work that has been done over the past few years has laid the foundations for the future success of our business.”
However, noting a decelerating in the company’s comp sales and a lower-than-expected margin expansion (widened to 27% form 24.6%) some analysts gave a more conservative outlook for Prada.
Thomas Chauvet, luxury analyst at Citi, said core earnings and margins were slightly below their expectations, despite a boost to margins through a reduced discount sales period and better distribution control. “We would also highlight risks of volatility in tourist flows into Europe and intra-Asia, possibly exacerbated by the recent China bird flu outbreak,” Chauvet said.
Noting the timing of the Chinese New Year holidays, bad winter weather in Europe and political unease in the Koreas, Bertelli said the second half of 2013 “may not be characterized by the economic recovery everybody was hoping for.”
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