* Seeks to lessen reliance on Asia
* Says not sure will be economic upturn in H2 2013
* Shares up 4 pct this year, outperforming benchmark index
* CITI analyst says earnings slightly below consensus
By Farah Master and Antonella Ciancio
HONG KONG/MILAN, April 5 Italian fashion house
Prada SpA plans to focus its next retail push on the
Middle East and the Americas to offset lower spending in Europe
and lessen its reliance on Asia, where booming growth is
The maker of leather bags and colourful Miu Miu dresses said
it expected economic uncertainty to persist in parts of Europe
and Asia this year.
Thomas Chauvet, luxury analyst at Citi, said core earnings
and margins were slightly below their expectations, despite a
boost to margins through a reduced discount sales period and
better distribution control.
"We would also highlight risks of volatility in tourist
flows into Europe and intra-Asia, possibly exacerbated by the
recent China bird flu outbreak," Chauvet wrote in a note.
Signs of a slowdown have emerged recently in spending by
Asian tourists - the recent driving force in the European luxury
market, defying economic recession.
"This is the first time since the June 2011 IPO that Prada
has not delivered a quarterly earnings beat," Chauvet said.
Prada said revenue in February was strong thanks to Chinese
New Year celebrations but bad weather conditions in Europe and
political concerns in South Korea weighed on March performance.
"The second half of 2013 may be not be characterised by the
economic recovery everybody was hoping for," Chief Executive
Patrizio Bertelli said in a conference with analysts.
A crackdown on corruption and ostentatious spending in China
from the second half of 2012 has dampened sentiment for
conspicuous brand names.
Chinese economic growth slowed to 7.4 percent in the third
quarter of 2012, its lowest quarterly rate in three years, while
the total number of billionaires in Greater China fell to 157
from 176 last year, according to research by Exane BNP Paribas.
But luxury analysts say Prada's top product line, which
frequently rotates its collections in stores, has remained in
vogue and avoided brand weariness among the well-heeled.
Prada, which sells over a third of its products in Asia,
says it still has ample growth prospects in emerging markets
where it has a smaller presence compared to rivals like LVMH
and Salvatore Ferragamo.
Prada's net profit in the fourth quarter grew 36 percent to
217 million euros ($279 million), beating an average forecast of
202 million euros by Thomson Reuters I/B/E/S.
"Our major focus will be on the Gulf area, South America,
and U.S. department stores," Bertelli said.
The group currently has 196 stores in Asia, including Japan,
and 185 in Europe with just five in South America and 11 in the
Middle East, nine of which opened in 2012.
KEEPING THE APPEAL
The Hong Kong-listed company said it would maintain its
appeal by reducing discount sales and entering new markets."We
don't want to glut the market with our products," Bertelli said.
Ferragamo, Hermes and Gucci have reduced
discounts and tightened control on wholesale partners to avoid
risks of late payments and non-authorised sales.
A stricter discount policy boosted margins at Prada but hit
sales volumes, which were up only 5 percent in the fourth
quarter, if excluding contribution from new stores.
Prada confirmed a guidance of a high-single digit growth in
sales at its existing stores for this fiscal year.
The company, which opened 78 shops last year for a total of
461 directly-managed stores, confirmed plans to open up to 80
new stores this year, including four or five in South America.
Sales in Europe have continued to grow but at a weaker clip
than in Asia. Overall revenue climbed 29 percent to 3.3 billion
euros in 2012.
The greater China region, which includes mainland China,
Hong Kong and Macau, generated net sales of 735.6 million euros,
up 35 percent from 2011, the company said.
Prada's shares, which more than doubled in 2012, are up 4
percent so far this year, outperforming a 4 percent fall in the
benchmark Hang Seng Index. The company has a market value
of about $26 billion.
For 2012, total net profit came to 625.7 million euros, up
45 percent from 431.9 million euros a year earlier. That was
slightly below an average analyst forecast of 639 million euros
by Reuters I/B/E/S.
Prada said it would pay a dividend per share of 0.09 euros,
above Citi's forecast of 0.07 euros.