Prada sales dip but firm vows growth ahead, investors are convinced as share price rises

Is luxury powerhouse Prada’s crown seriously slipping? The latest sales figures might have suggested so. But the markets Monday morning disagreed.

The not-so-good-news from the Italian fashion house Sunday was a shock dip in sales, albeit only slightly, for 2014, marking a halt to the sure-fire double-digit growth of previous years. But Prada also gave assurances of better times ahead, and a promise to cut costs, drawing in its breakneck speed/spend on store openings. The result? A 4.5% surge in its share price in early Monday morning trade.

Prada group sales for the year ending January 2015 inched down 1% year-on-year to €3.5bn ($3.98bn), just short of analysts’ forecast for sales of €3.57bn. That follows growth of 9% and 29% in the respective preceding years.

Prada’s core signature brand sales slipped almost 2% following a 32% rise in 2013. By contrast, sister brand Miu Miu saw its sales rise 4%, with geographic success only escaping it in Europe. The brand achieved good rates of growth in all other markets, including Asia, it noted.

Elsewhere, footwear sales were king, with Church’s up 14.8% and Car Shoe not far behind, rising 12.7%.

Retail sales were broadly unchanged at €2.98bn despite opening more than 50 stores last year.

Growth in the Americas, Middle East and Japanese markets, up 7%, 9% and 13%, respectively, failed to offset a 7% dip in Asia-Pacific, hit by weakness in the Hong Kong and Macau territories where it said market conditions had deteriorated “significantly” during H2. The different timing of the Chinese New Year against a year ago, also skewed figures for Greater China.

European sales were also down 1% as fewer tourists and weak domestic demand combined to dull the performance there. However, Prada also talked of sales improving in the final quarter, without giving details.

Chief executive Patrizio Bertelli cited a “more-complex-than-thought geopolitical and monetary environment” for its current woes but stressed “this current situation has temporarily held up the group’s path of growth, but it will not affect our medium/long-term growth objectives.”

He said Prada would have to contain costs, opening fewer stores than planned in 2015. It had 594 directly run stores as of January 31.

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