Prada to Add 260 Shops in 3 Years on Demand From BRICs

May 24 (Bloomberg) -- Prada SpA Chief Executive Officer Patrizio Bertelli talks about the company's growth and pricing strategy. Prada, the Italian fashion company that owns the Miu Miu and Church’s brands, plans to add 260 stores by the end of 2014 to tap demand in emerging markets including Brazil, China and Persian Gulf countries. Bertelli spoke in Hong Kong with Bloomberg Television's Robyn Meredith. (Bertelli spoke in Italian. His remarks are translated. Source: Bloomberg)

Prada SpA (1913), the Italian fashion company that owns the Miu Miu and Church’s brands, plans to add 260 stores in the next three years to tap demand in emerging markets including Brazil, China and Persian Gulf countries.

“We aim to speed up expansion by opening 100 stores this year, 80 stores each in 2013 and 2014 globally,” said Chief Executive Officer Patrizio Bertelli whose company opened 75 stores last year.

Demand for Prada leather goods and other items is rising even as China’s economic growth slows and Europe’s debt crisis weighs on consumer spending, Bertelli said. The company is benefiting from increasingly wealthy Chinese tourists who are fueling growth in Europe as it also targets markets in the Middle East, he said.

“We are expanding in Morocco, Istanbul, Beirut, Dubai and Qatar,” Bertelli said in an interview with Bloomberg Television conducted in Italian via a translator. “Brazil is also a big market we’re looking at.”

The expansion would increase the number of Prada outlets to 674 by adding to the 388 directly operated stores and 26 franchises it had as of January.

The so-called BRICs take their name from the emerging economies of Brazil, Russia, India and China.

Sales of discretionary goods in China will grow by a compounded annual rate of 13.4 percent between 2010 and 2020, as shoppers in the world’s second-largest economy become richer, McKinsey & Co. said in a report in March. Such growth attracts Prada, as well as Paul Smith Ltd. and Michael Kors Holdings Ltd., to set up shops in the most populous nation.

Rising Incomes

Chinese urban disposable income rose 14 percent to about 21,810 yuan ($3,450) in 2011.

Prada rose 0.1 percent to HK$45.70 at the close in Hong Kong trading while the benchmark Hang Seng Index (HSI) dropped 0.6 percent. Shares of the company, whose $2.5 billion initial public offering was Hong Kong’s biggest in 2011, have gained 30 percent this year.

The Milan-based company expects the sales contribution of the Asia Pacific region to rise to 40 percent in 2012 and 2013, from 35 percent last year. It plans to open 12 to 15 new stores in China this year, and India is the next destination.

“We currently do not have any shop in India, but we are looking to open a first store maybe in a luxury hotel in Mumbai or New Delhi soon,” Bertelli said.

The euro has declined 11 percent against the dollar and 13 percent versus the yuan in the past year, and Bertelli said the company may consider increasing prices by as much as 10 percent in Europe if the single currency continues to depreciate.

Counterfeit Goods

“We need to maintain the same value,” said Bertelli, the husband of Miuccia Prada, the designer of the brand. “We may compensate the currency adjustment by raising prices in Europe.”

The 66-year-old chief executive also said the company plans to ramp up the presence of the Miu Miu brand as it is “underpenetrated” in many countries.

While EBay Inc. (EBAY) was fined by France’s high appeals court for sales of counterfeit LVMH Moet Hennessy Louis Vuitton SA (MC) goods on its website, Bertelli shrugged off concerns that fake goods could hurt the company’s sales in markets such as China.

“Fake goods aren’t totally bad, at least it created jobs at some counterfeit factories,” said Bertelli. “We don’t want to be a brand that nobody wants to copy.”

To contact the reporter on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net

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