RPT-UPDATE 2-Prada bets on men to accelerate sales growth

Wed Apr 2, 2014 2:34pm EDT

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* Prada to invest in menswear, shops, factories

* Sales to grow "high single digit" in 2014, 11 pct in 2015-16

* Net profit rises less than 1 pct in 2013, drops in Q4

* Plans China openings, brushes off Russia concerns

By Isla Binnie

HONG KONG/MILAN, April 2 (Reuters) - Italian luxury fashion group Prada is pinning its hopes on men's growing taste for finely-cut suits and leather bags to drive a pick up in sales growth in the coming years.

The 101-year-old brand, the largest in a group including Miu Miu, Church's and Car Shoe, said on Wednesday it aimed to almost double menswear sales to 1.5 billion euros ($2.1 billion) over three to five years, and open more dedicated men's shops.

Along with other store openings and an increase in production capacity, the company told analysts and investors it expected the expansion of its menswear business to help return it to double-digit sales growth by 2016.

"Men will be protagonists in our development," Prada retail director Guilio Bruni said. The company forecast a high single-digit percentage rise in sales this year and at least 11 percent in 2015-16.

While luxury sales remain predominantly to women, the market for men is growing more rapidly, according to management consultancy firm Bain, leading a number of brands to launch more products aimed at them.

Italian label Brunello Cucinelli said in January it would invest to appeal to the male market.

Prada's men's products include leather briefcases and tailored suits. Bernstein analyst Mario Ortelli welcomed the move, saying: "The menswear strategy could provide an important boost."

Prada, whose menswear business made around 800 million euros of sales last year, said it would open 50 dedicated men's stores from 2014-2016, added to the 30 it currently has.

The company reported 2013 sales up 9 percent. Net profit, however, rose less than 1 percent and dropped 13 percent year-on-year in the fourth quarter amid a broader slowdown in the luxury sector as once voracious demand in China cooled.

Prada, which regularly mixes men and women on the catwalk for its fashion shows, said group like-for-like sales growth was about 7 percent last year and stayed at that level in the fourth quarter, in contrast with luxury peers such as Gucci and Tod's whose sales weakened later in the year.

Having rapidly expanded its retail network since its 2011 listing, Prada now plans to invest up to 450 million euros this year in projects including 80 new shops and four new industrial plants which should open by the end of next year.

POSITIVE ON CHINA, RUSSIA

Retail locations in Prada's sights include China, in contrast with Gucci which has pulled out of some locations in the world's biggest luxury goods market.

"Even if we open the shops we are going to open in the next two to three years (in China) we will still be lower than most of our direct competitors," finance chief Donatello Galli said.

The Prada brand has 146 directly-operated stores in Asia including Japan. Sales rose in Asia Pacific in 2013 at more than double the rate in Europe.

Chief Executive Officer Patrizio Bertelli brushed aside questions about possible risks to Prada's business in Russia, where concerns have been raised by geopolitical troubles.

"Russia is a country of 180 million people, with a strong economy and consumers who like luxury," Bertelli said, adding the group's sales in Russia had risen 30 percent last year.

Prada's Kiev store was temporarily closed during protests in the Ukrainian capital this year, but is now open again.

Bertelli, who owns a controlling stake in Prada alongside his wife, creative director and co-chief executive Miuccia Prada, said they could put a further 5 percent on the market.

"We have not evaluated selling another stake but the option of looking into placing 5 percent in the future should not be written off," Bertelli said.

Prada shares closed at HK$61.75 on the Hong Kong market on Wednesday before the presentation, and are down 10.5 percent so far this year compared with a 3.4 percent dip in the benchmark Hang Seng index. The company proposed a dividend of 0.11 euros per share, up 22 percent from last year.

($1 = 0.7263 Euros) (Reporting by Clare Baldwin in HONG KONG and Isla Binnie in MILAN; Additional reporting by Tripti Kalro in BANGALORE; Editing by Matt Driskill and Mark Potter)

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