Prada’s 2013 Profits Edge Up, Missing Estimates

In What's New, Industry News by Jeff Prine

Lupita Nyong’o carries the MiuMiu SS2014 advertising campaign handbag

Lupita Nyong’o carries the MiuMiu SS2014 advertising campaign handbag

Milan—Prada SpA today reported its 2013 full year profit rose only 0.3% hindered by a weak European market and currency fluctuations, which could affect its 2014 revenue.

The parent to Miu Miu, Church’s and Prada brands posted a profit of 627.8 million euros (about $866.01 million) in the year ended Jan. 31. That missed Analysts’ average expecting a profit of 673.58 million euros.

Expansion Planned for Miu Miu, Church’s

As reported in February, revenue was up 8.8% to 3.59 billion euros (about $4.95 billion). In Europe, which accounts for about 20% of Prada’s total volume, sales rose only 5%. But in Asia-Pacific, its largest market, Prada saw sales growth of 11.4% with Greater China up 12.3%. The Americas reported an 11% increase and sales in the Middle East doubled to 91.1 million euros.

According to Patrizio Bertelli, co-chief executive, Prada will be making a push for its Miu Miu brand, hoping to reach 800 million euros in sales by 2016, up from 519 million euros in 2013.

Miu Miu’s sales were up only 1% in 2014 while the Prada brand grew 11%. To increase sales, the company plans to open 70 additional Miu Miu shops by 2016, broaden the product range, and add more costume jewelry and sportswear, Bertelli said. He said that they are considering raising the prices for some items in the Miu Miu line as well as other of the group’s brands.

Another brand slated for growth is Church’s, where Prada hopes to triple sales within five years, up from 68.6 million euros last year. Prada will invest in expanding Church’s shoe factory in the UK. “We’ve been looking to develop Church’s for the last 10 years, but other priorities always too precedent,” Bertelli said. “Now we are finally able to move forward with that.”

At its Prada brand, the company will be opening another 100 new stores including the 50 men’s-only versions. Bertelli also said that it is reviewing its e-commerce strategy, especially in the United States, where an expanded offering will be added. Bertelli said the “The U.S. is a test for us,” noting any expansion will be done cautiously so not to tarnish the luxury image of the brand.

Bertelli said the company plans to invest in increasing production capability, including new manufacturing facilities in Italy for apparel and accessories. The addition would add about 5% more internal capability, up from 20% currently.

Interestingly, Thomson Reuters SmartEstimates predicts that Prada will have the highest revenue and profit growth in the next 12 months, up 11.5% and 14.8%, respectively—the best among European luxurygoods companies.



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