Prada Sees Growth as Product Pricing Helps Earnings Rise

Prada SpA, an Italian maker of $1,150 studded leather slippers, said it remains confident of succeeding in a challenging economic climate after a policy of cutting discounts helped profit beat analyst predictions.

Net income in the 12 months ended Jan. 31 rose 45 percent to 625.7 million euros ($811 million) from 431.9 million euros a year earlier, Milan-based Prada said today in a statement. Analysts expected profit of 618 million euros, according to the average of 29 estimates compiled by Bloomberg. Fourth-quarter profit gained 37 percent to 217 million euros.

Prada limited markdowns in the final quarter of the fiscal year as same-store sales growth decelerated from the previous three months, mainly because of the later timing of the Chinese New Year in 2013. The full-price policy and new stores helped support margins, with earnings before interest and tax widening to 27 percent of sales from 24.6 percent a year earlier.

“The group remains confident that the strategy which has been coherently deployed in recent years with regard to brand positioning and retail expansion will again be a key success factor for the forthcoming fiscal year, even in a general economic environment that remains challenging,” Prada said. The number of directly operated stores as of Jan. 31 rose 19 percent from a year earlier to 461 outlets.

Stock Performance

The earnings were released after the close of trading in Hong Kong, where the company’s stock is listed. Prada shares fell 1.5 percent to HK$77.10 today, giving the owner of brands including Church’s and Car Shoe a market value of HK$197.3 billion ($25.4 billion).

“Prada represents a structural-growth story, supported by a strong store opening plan and compelling like-for-like growth, with substantial margin upside potential across both flagship brands, Prada and Miu Miu,” Allegra Perry, an analyst at Cantor Fitzgerald who recommends buying Prada shares, wrote in a report last week. “We see a significant opportunity in Asia where the group is under-penetrated.”

Prada proposed a dividend of 9 euro cents a share, almost double the year-earlier payout of 5 cents.