Prada frets about tourist stayaways

MILAN/HONG-KONG Thu Jun 7, 2012 10:26am EDT

The Prada logo is seen outside its store in Hong Kong June 12, 2011. REUTERS/Tyrone Siu

The Prada logo is seen outside its store in Hong Kong June 12, 2011.

Credit: Reuters/Tyrone Siu

Related Topics

MILAN/HONG-KONG (Reuters) - Italian fashion group Prada warned a deepening euro zone crisis could scare away free-spending tourists who have shielded luxury firms from an uncertain global economy and who helped lift quarterly profit at the maker of coveted leather handbags and shoes.

First-quarter profit doubled at the Milan-based maker of colored Miu Miu dresses, outpacing revenue growth, but the company is not immune from concerns about the euro zone, a sluggish U.S. recovery and a possible slowdown in Asia.

"If the Greek crisis spread to Spain or Italy it would slow tourist flows. And if it affected tourists, it would impact us," Prada's Vice President Carlo Mazzi told Reuters in a phone interview.

In a confirmation of its strong brand appeal, Prada achieved its best performance in the European market, when it grew 57 percent in the three months to the end of April.

Asia, which makes up around 38 percent of sales, grew 47 percent while revenues in the United States rose by more than a third.

Retail is a big growth driver for Prada, which confirmed its planned retail expansion of adding 260 stores in the next three years, mostly in new cities.

Prada has a total of 402 directly operated stores, less than bigger peers such as Louis Vuitton and PPR's Gucci, Mazzi said.

CHINA MOMENTUM

Prada said net revenues climbed 47.9 percent, above estimates. It added it would focus on cash-flow generation and financial flexibility while cautioning on the crisis.

Net profit more than doubled to 121.7 million euros ($152 million) in the quarter, largely beating forecasts and showing that the company's retail expansion in Asian markets paid off.

China's luxury market is poised to grow 18 to 20 percent this year, outperforming the single-digit forecasts for Europe, the Americas and Japan, according to U.S. consultancy Bain.

Listed in Hong Kong, Prada's shares have gained nearly 30 percent so far this year, easily outperforming the benchmark Hang Seng Index's 1.3 percent gain.

Earnings before interest and tax (EBIT) rose 106 percent to 164.8 million euros, driven by retail sales, and lower markdowns.

The luxury goods industry has enjoyed a strong recovery from the 2008 financial panic that saw even the most affluent buyers cut back on discretionary spending.

In March, Tiffany & Co cut its fiscal-year sales and profit forecasts on economic concerns in China and the United States, while Tod's and Brunello Cucinelli have recently seen negative sales in recession-hit Italy.

(Additional reporting by Alison Leung in Hong Kong and; Sabina Suzzi in Milan; Editing by David Holmes and David Cowell)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.