Prada profits jump on Asian sales

Prada, the Milanese luxury goods group which listed on the Hong Kong stock exchange in June, reported a big jump in profits as the Asia-Pacific region again proved to be its biggest market by sales and the company said it had slashed its net debt.

The figures, which beat the company’s forecasts in its listing prospectus, come as sales momentum in the luxury goods industry shows no signs of succumbing to the wider consumer malaise. HSBC estimates luxury demand will grow 15 per cent this year and 11 per cent next.

First-half net profit at Prada Group, which includes brands Prada, Miu Miu and Church’s, rose 75 per cent to €179.5m compared with the first six months of last year as it continued a rollout of its retail network across the Asia-Pacific region. Group revenues were up 24 per cent at constant exchange rates to €1.13bn. Earnings before interest tax depreciation and amortisation were up 40 per cent to €315m.

The group’s net debt also showed a significant decrease. Prada’s founder Miuccia Prada, the designer, and her husband, Patrizio Bertelli, had been spurred to list the group on the stock exchange in Hong Kong in order to cut debt taken on during a failed buying spree in the last decade.

Prada said its net debt as of July 31 2011 was €135.2m, down from €408m six months earlier as a result of its having €200m from a capital increase undertaken at the time of its listing.

Mr Bertelli said he was “particularly satisfied” with the first-half figures which confirmed the group’s expansion strategy as presented to investors during the roadshow for its listing in Hong Kong.

Prada has concentrated on expanding its retail network, a strategy widely adopted by the most successful luxury goods groups as it gives them greater pricing and supply flexibility. This allows them to benefit more in consumer booms and more readily to withstand downturns than selling through wholesale channels.

The group said it had opened 29 new stores in the past six months, bringing its total network of directly owned stores to 358. It plans to have opened 550 stores by the end of 2013 with more than half of these in Asia-Pacific, and new store openings in Latin America, Russia and the Gulf states.

As well in the Asia-Pacific region, sales grew strongly in its higher margin leather goods business. The weakest performance was in ready-to-wear clothing, where Prada said sales were “stable”.