The Pope wears Prada, or so it is rumoured (the Vatican has denied it). So do a growing cohort of Asians. Because of that exposure – Asia accounts for 35 per cent of the Italian luxury goods group’s sales, its biggest segment – Miuccia Prada and her husband Patrizio Bertelli told themselves that Hong Kong was the natural exchange on which to list. Given that Prada’s share price is about 25 per cent higher now than at listing last June, they might be right. The trouble is that an Asian listing could also be shrinking the room the company has to disappoint investors. At a multiple of 23 times forward earnings, Prada’s share price is assuming a lot of good news.

Thursday’s first set of annual results contained no nasty surprises. Earnings per share were up 70 per cent and same-store sales grew 23 per cent – almost double the level of organic growth at LVMH. That is impressive, but hard to maintain.

Although the price of luxury goods is at least partly hinged on scarcity, Prada continues with its aggressive expansion. Its directly operated store network grew by a quarter last year, to 388 stores. That is two Prada stores for every country in the world. As a result, the cost of running these stores stayed at almost one-third of sales, consistent with 2010. And inventories grew one-third more than sales growth.

More emphasis on fixed costs is fine so long as growth stays strong. But almost half of Prada’s new stores were in Europe, which was its second slowest region after Japan last year. And even if the expansion strategy is pinned on the idea that Asians keep spending in Europe to save on taxes at home, you only have to look at discounts on luxury cars in China right now to see that there is some slowdown.

Prada’s investors are probably as pleased with the share’s returns so far as the Pope is with his shoes. But the path ahead is less certain.

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