Italian fashion group Prada warned a deepening Eurozone 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 coloured Miu Miu dresses, outpacing revenue growth, but the company is not immune from concerns about the Eurozone, a sluggish US recovery and a possible slowdown in Asia. “If the Greek crisis spreads to Spain or Italy it would slow tourist flows. And if it affected tourists, it would impact us,” Prada’s vice-president Carlo Mazzi said.
In a confirmation of its strong brand appeal, Prada achieved its best performance in the European market, when it grew 57 per cent in the three months to the end of April. Asia, which makes up about 38 per cent of sales, grew 47 per cent while revenues in the US 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.
Prada said net revenues climbed 47.9 per cent, 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 (Dh563.3 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 per cent this year, outperforming the single-digit forecasts for Europe, the Americas and Japan, according to US consultancy Bain.
Listed in Hong Kong, Prada's shares have gained nearly 30 per cent so far this year, easily outperforming the benchmark Hang Seng Index's 1.3 per cent gain. Earnings before interest and tax (EBIT) rose 106 per cent to ?164.8 million, 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 US, while Tod's and Brunello Cucinelli have recently seen negative sales in recession-hit Italy.from gulfnews.com.