Prada says China is key to profits, despite flat results
The Chinese market for luxury fashion products will be the main driver of growth at Italian group Prada, the company said on Thursday after reporting stable profits.
Prada played down talk of a slowing of the Chinese luxury sector, after reporting almost flat net profit for 2013 of 627.8 million euros ($864 million).
That figure showed an increase of 0.3 percent from the outcome the previous year, and Prada said that the results had been held down by the strength of the euro and an increased tax charge.
The company, which also reported a sales leap in the Middle East, has set a target of raising sales by 9.0 percent this year and intends to open 120 shops around the world in the next three years.
China has introduced tough laws to fight corruption, including restrictions on lavish entertainment and the giving of expensive gifts.
Some luxury product groups, which had experienced booming sales to a new middle class in China, have reported signs of a slowdown of their activities there, blaming in part the new laws and in part a slowing of the Chinese economy.
The makers of luxury watches in particular have seen their sales slow down.
But in remarks to the French business newspaper Les Echos on Thursday, Prada chief executive Patrizio Bertelli, said that China would be the key market for the company and that forecasts of sharp slowdown of the Chinese luxury market were mistaken.
"I do not really believe that the Chinese market has yet reached maturity," he said.
Prada reported that its overall sales last year rose by 8.8 percent from the 2012 level to 3.58 billion euros.
Of these, 84.5 percent was achieved by the retail arm of the company which raised its sales by 12.5 percent in the year to nearly 3.0 billion euros.
Sales by the wholesale arm fell by 6.9 percent to 551.6 million euros.
Sales in Europe rose by 4.4 percent despite a gloomy economic climate but in the Middle East sales nearly doubled to 91.1 million euros.
Sales in the Americas rose by 10.9 percent.
Earnings before interest, tax, depreciation and amortisation rose by 8.6 percent to 1.143 billion euros and operating profit by 5.6 percent to 939.2 million euros.
The company, founded in Milan in 1913, obtained a listing on the Hong Kong stock market three years ago
Bertelli said that the group was aiming to achieve total sales of 5.0 billion euros in three to four years' time, saying also he was not planning any takeovers and did not intend to obtain a second listing in Europe.
The group has reached an agreement with Italian tax authorities to repay nearly 500 million euros.
© 2014 AFP