Prada SpA (1913), an Italian maker of $2,950 perforated patent-leather handbags, reported fiscal 2011 profit that beat analysts’ estimates and proposed paying the first dividend since last year’s initial public offering.
Net income rose 72 percent to 431.9 million euros ($573.9 million) in the year ended Jan. 31, the Milan-based company said today in a statement. The average of 13 analyst estimates compiled by Bloomberg was for profit of 414.3 million euros. Shareholders will get a dividend of 5 cents a share.
The results “confirm the group’s ability to achieve strong growth while continuing to become more profitable,” the company said. Prada, whose IPO was Hong Kong’s biggest in 2011, follows competitors including Hermes International SCA (RMS) in predicting sustained demand for high-end goods as Chinese economic growth slows and Europe’s debt crisis weighs on consumer spending. Revenue last year climbed 25 percent to 2.56 billion euros.
Prada’s growth story is “‘appealing but risks remain,” Antoine Belge, an analyst at HSBC, wrote in a report this month. The level of fixed costs means profitability “will be more exposed to a slowdown in demand than others,” wrote Belge, who has a “neutral” recommendation on the shares.
While the medium-to-long-term context is “positive” for the luxury industry, “the current macroeconomic environment is still characterized by uncertainty and volatility which, especially in the short-term, could have negative repercussions for performance on certain markets,” Prada said. “In light of this situation, the group will maintain adequate control of the use of resources and ensure that it is flexible enough to be able to react to possible changes in the situation.”
In 2012, Prada will focus on upgrading and opening more stores, including in mature markets, where there is an increasingly significant flow of foreign travelers, it said.
The earnings were released after the close of trading in Hong Kong. Prada shares rose 1.8 percent to HK$49.55 today, giving the owner of the Prada, Miu Miu, Church’s and Car Shoe brands a market value of HK$126.8 billion ($16.3 billion).
Revenue climbed in all geographies last year, led by the Asia-Pacific region, which increased its share of total sales to 34.6 percent from 30.4 percent, and by the Prada and Miu Miu brands, the company said.
Retail sales climbed 38 percent as Prada opened 75 stores, taking the number of boutiques it operates directly to 388. On a like-for-like basis, retail growth was 23 percent.
Wholesale revenue declined 5.2 percent, which the company attributed to its policy of being more selective about third- party accounts in Europe and to bad weather and strikes in Italy, which affected deliveries.
Earnings before interest, taxes, depreciation and amortization advanced 42 percent to 759.3 million euros, while the Ebitda margin widened to 29.7 percent from 26.2 percent.
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