Saturday, 31 March 2012

Prada's Asia Focus Boosts Profit 72%

Prada SpA's 1913.HK +1.92% sharp focus on Asia resulted in a 72% rise in profit for its most recent fiscal year, a sign that one of the luxury-goods industry's biggest bets on the growing Chinese market is paying off.
Prada—which includes the main Prada label as well as Miu Miu, Church's and Car Shoe—said Thursday that net income for the year ended Jan. 31 jumped to €432 million ($575.3 million) from €251 million a year earlier.
Imaginechina/Zuma Press
Prada has 25 boutiques in China, including this one in Shanghai. 'Our expansion is not complete,' said Deputy Chairman Carlo Mazzi.
Sales rose 25% to €2.56 billion. It was the Italian fashion house's first annual report since listing shares in Hong Kong last June.
"Our brand awareness is big enough, but our expansion is not complete," Prada Deputy Chairman Carlo Mazzi said in an interview. "In China, we're present in just 10 cities. There are many important cities we are not present in and where we need to open."
Luxury-goods purveyors—from watchmakers to clothing labels to wine producers—are banking on newly wealthy Asian shoppers to lift the sector's sales. Through the recent economic downturn, Asian consumers spending at home and abroad counteracted the slumping growth in Europe and the U.S.
Now, the Asian-Pacific region has become the largest market for Prada, and it is among the leading regions for other players such as LVMH Moët Hennessy Louis Vuitton SAand Gucci owner PPR PP.FR +1.18% SA. Many luxury-goods analysts expect China to become the biggest country for luxury goods by the end of the decade, supplanting the more mature Japan.
Prada's sales in Asia, excluding Japan, soared 42% last year and now account for more than one-third of the group's sales. Eighteen of the 75 stores Prada opened last year were in Asia, bringing its total network in China to 25 boutiques. In Guangzhou and Shenyang, for example, Prada opened stores for both its Prada and Miu Miu labels.
Prada didn't neglect other regions. The biggest number of boutique opening were in Europe, where Prada and competing labels such as Hermès, Burberry and Louis Vuitton are pouring millions into flagship shops to burnish their image. Increasingly, tourists—in many cases from China—are the biggest spenders even in European shopping capitals.
Sales of high-margin leather goods increased 41% to account for 56% of Prada's sales. Though the Prada brand has become known in the past 20 years as a trendsetting fashion house—making a case for the return of the pantsuit in its runway show last month—its roots are as a luggage maker. Mr. Mazzi said leather-goods sales boomed because they are the most prominent items in new stores, and are best sellers among tourists.
Despite Prada's optimism about Asian luxury spending, the company isn't releasing growth targets. Rival Gianni Versace SpA this week predicted three years of at least 10% sales growth. "Markets are too anxious," Mr. Mazzi said. "The top luxury market is a little more sure than the rest of the market."
Write to Christina Passariello at

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