Prada's profit growth slows, Europe still under pressure
HONG KONG/MILAN (Reuters) - Hong Kong-listed Italian luxury fashion house Prada SpA (1913.HK) reported a lower-than-expected rise in quarterly profits on Friday and warned its European sales might be down on a year ago in the final two months of this year.
"We're still waiting for the final data, but there might be a small decrease compared to last year in Europe - not in global performance," Chief Executive Patrizio Bertelli said on a conference call.
He was speaking after the maker of luxury leather goods and Miu Miu brand dresses posted an 8.6 percent rise in net profit to 132.64 million euros ($182 million) for the three months ended October 31, as solid performance in the Americas and Japan made up for slowing growth in Europe and Greater China.
Three analysts polled by Reuters had given a median forecast for net profit of 154 million euros. Revenue in the quarter increased 7.1 percent to 848 million euros.
Net profit in the same period last year was up 30 percent on the previous year at 122.2 million euros.
Along with other luxury groups like LVMH Moet Hennessy Louis Vuitton SA (LVMH.PA) and Kering SA (PRTP.PA), Prada has had to contend this year with a crackdown on conspicuous spending by government officials in China, where the company normally generates almost a quarter of total sales.
Sales growth in Greater China moderated in the third quarter, Prada said, partly because its flagship stores in Hong Kong and Macau were undergoing renovation work, but Bertelli said the group had still seen good demand from Chinese shoppers abroad.
"The Chinese consumers tend to be strong travelers and they shop a bit everywhere," Bertelli said. "We see a lot of Chinese shoppers in other places like New York, for example."
Prada said the strength of the euro against other currencies, in particular the Japanese yen and U.S. dollar, had weighed on its reported growth. The company also said it had been hit by high taxes in Italy.
"Net income was slightly impacted by exchange rates and a higher tax rate due to the ongoing discussions with Italian authorities on controlled foreign company legislation," chief financial officer Donatello Galli said on the conference call.
Later on Friday, Prada Holding, which controls Prada, released a statement saying it would "repatriate" assets held in the Netherlands and Luxembourg, a move which Bertelli said in the statement was "coherent with our desire to invest in Italy". The process was not related to Prada, the holding company said.
Bertelli also said the company was going to do more to promote its Miu Miu ready-to-wear label, named after chairwoman Miuccia Prada. The group's reliance on its flagship brand has been a concern for analysts.
"We are going to invest more in communications and marketing for the Miu Miu brand," Bertelli said. "We are confident that the results will show next year."
Sales of the Prada brand rose 10 percent in the third quarter, but Miu Miu lagged with a 2 percent sales decline.
"The development of Miu Miu is an important plank to extend growth dynamic into the future," said Exane BNP Paribas analyst Luca Solca after the results were announced.
Shares in Prada closed 0.2 percent higher ahead of the results, while the Hang Seng Index .HSI was down 0.3 percent.
(Reporting by Donny Kwok and Lee Chyen Yee in Hong Kong and Isla Binnie in Milan; Editing by Andrew Roche)