Prada’s Patrizio Bertelli, CEO, was present during the Q&A on the conference call this morning in order to reassure investors that there was “no huge disaster occurring in the luxury goods sector”. The company is “confident about the near future” and appears comfortable with around mid-teens SSS for the full year – which implies around 10% SSS for 1H and well above guidance for some of its peers. The company is on track to open 80 stores this year and the retail focused strategy is unchanged.
Prada S.p.A. (HKG:1913)’s 2Q EBITDA margin improved 110bp yoy to 31.3% vs. consensus at 28.2%. The beat was primarily driven by the continued strength in the retail segment, and came on the back of a tough comp as wholesale revenue in the previous year was skewed to 2Q. 1H net profit +60%
On August 6, Prada S.p.A. (HKG:1913) posted 1H sales of +36% with SSS of +19%. Prada’s 1H FY13 preliminary operational data (released on 6 Aug) showed that SSS growth remained strong at 19.0%, with revenue of EUR1,548mn (+36.5% y/y). Asia Pacific led the growth with revenue up 45% y/y to EUR534mn, followed by Europe with 37% y/y growth to EUR344mn. 1H retail contributed sales of EUR1,229mn (+47.2% y/y growth and 80.6% of total sales) and wholesale EUR296mn (+4.8% y/y growth and 19.4% of the total).
By brand, ‘Prada’ and ‘Miu Miu’ were the main growth drivers, while 1H sales grew by 40.5% and 23.6% respectively.
As at 31 Jul 2012, the company operated 414 stores (net addition of 26 stores since FY13), of which 263 stores were branded ‘Prada’ (+18 since FY13), 102 Miu Miu (+8 since FY13), 43 Church’s (flat since FY13) and six Car Shoe (flat since FY13).
Most regions are performing well and the company emphasises the importance of all emerging market customers not just Chinese. Today the company released the full set of 1H results with net profit up +60% (vs. +61% expected). Operating leverage remained very strong with gross margin up 50bps and Ebitda up 250bps with all SG&A down aside from selling costs (which grows with store expansion).
Rewarding flexibility
Many investors believe it is important to appreciate the company’s industrial model, which results in shorter lead times and new products introductions each month. This allows the company to better meet rapidly evolving customer tastes. Fast rotation through the supply chain also results in relatively low inventory levels, which were basically flat vs. year end despite the rapid sales increase.
CLSA upgraded Prada S.p.A. (HKG:1913), with a price target of $80.20 HK
Disclosure: No position in any securities mentioned
