Both Prada Group and Hermès International reported strong fourth-quarter sales gains on Thursday, although for the entire year of 2002 they went in opposite directions: Prada’s sales dipped while those at Hermès rose only slightly. As is common in Europe, the companies reported sales first and will detail their profit performances in coming weeks.
The improvement of the companies in the fourth quarter came despite a trying time for the entire luxury goods sector. A continued dry spell in global travel (at least of high-spending consumers); weak economies in the U.S. and Europe, and growing uncertainty over the Iraqi situation has cast a pall over the sector.
Luxury industry executives from Bernard Arnault of LVMH Moët Hennessy Louis Vuitton to Domenico De Sole of Gucci Group have repeatedly warned of the chilling effect a war with Iraq would have on their businesses. Indeed, Gucci on Wednesday warned that profitability at its key Yves Saint Laurent unit would be delayed by a year, to late 2004 and 2005 rather than this year as forecast.
Patrizio Bertelli alluded to the uncertainties created by a potential conflict with Iraq as the company reported that its sales grew 10.9 percent to $445.5 million from $401.6 million in the final three months of 2001. He attributed the increase to healthy wholesale and retail sales; investments in product innovation, and penetration in all international markets, even against the backdrop of a difficult economic environment and war worries that slowed down consumer spending and tourism. In the fourth quarter, gross operating margin nearly tripled to $77.1 million from $29.9 million.
"In this continuing weak economic context, the group is determinedly pursuing a vigorous development based on quality and innovation of products and on a strongly integrated industrial and commercial chain," said Bertelli in a statement.
For the year, however, Prada’s sales, excluding those of Fendi, dropped 3.1 percent for the full year to $1.67 billion from $1.73 billion, according to the firm’s preliminary numbers. Bertelli sold his 25.5 percent stake in Fendi to LVMH Moët Hennessy Louis Vuitton in November 2001 for about $260 million.