Prada shows off new growth phase with rising sales, profits

MILAN (Reuters) - Prada 1913.HK paved the way for a "new phase" of growth on Wednesday after the fashion brand reported rising sales, profit and income in the first half of the year.

FILE PHOTO: Prada's shoes are seen in the historical archive in the new factory designed by architect Guido Canali in Valvigna, Italy, June 8, 2018. REUTERS/Stefano Rellandini/File Photo

The Milan-based luxury company, jointly run by husband and wife team Miuccia Prada and Patrizio Bertelli, is looking to build on the first signs of a turnaround after posting falling profits since 2014.

Chief Financial Officer Alessandra Cozzani said the group was “quite comfortable” with achieving market consensus for full-year sales, at 3.2 billion euros according to Reuters data.

Cozzani also said sales in July confirmed the organic growth in revenues the fashion group had seen since February.

Considered an institution in the fashion world, Prada in past years has lost ground to both new and old rivals in an increasingly competitive industry dominated by cash-rich giants such as LVMH LVMH.PA and Kering PRTP.PA.

But in March the company pledged a return to growth this year after stemming a sales slide in the second half of 2017.

The company, founded in 1913, said the results of its change of strategy - focused on shops, products and online sales - aimed at reshaping the brand were “visible and supported by positive signals from the market.”

Prada has been investing in its retail network, with shops being renovated and moved to trendier locations. Prada has also launched pop-up stores to increase customer interest and push traffic towards nearby shops.

“The product mix is the right one,” Chairman Carlo Mazzi said. The group recently broadened and refreshed its product offer to include more casual items, including sneakers, a collection made of Prada’s iconic black nylon fabric and a re-edition of its Linea Rossa line.

In the past, industry experts had raised concerns that the group had to tackle problems with its product range, which was losing appeal among customers and underestimated the importance more sports and leisure clothes and shoes.

Revenues in the first six months of the year were up 9.4 percent at constant exchange rates year-on-year and net income rose 10.7 percent to 105.7 million euros ($123.4 million).

But Cozzani said that profits at the end of the year would depend on the impact of foreign exchange rates.

Earnings before interest and taxes (EBIT) in the first six months of the year were up 16 percent, to 159.2 million euros, just above analyst estimates of 157 million euros.

Prada also said that digital sales - set to reach 15 percent of total sales by 2020 - grew “strong double-digit” in the first half of the year, pushed by the group’s collaborations with online retail groups such as Yoox Net-a-Porter’s Mr Porter, Mytheresa and Farfetch.

Reporting by Giulia Segreti; editing by Francesca Landini and Jane Merriman