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Surprise Ending: Prada, Hermès See Sales Surge in 4th Quarter

The luxury numbers are starting to roll in and they’re rosier than expected, as Prada and Hermès reported strong fourth-quarter sales gains Thursday.

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Explaining the decrease, Prada in a statement cited unfavorable currency translation and, costing the firm an estimated $64.2 million in 2002 revenue, earlier deliveries, begun in 2001. Prada will report earnings later, but offered an indication of bottom-line results in reporting a 16 percent decline in gross operating margin to $224.9 million from $267.7 million in 2001. Dollar figures are converted from the euro at current exchange rates.

During 2003, Bertelli said he plans to open directly operated stores for Prada, Miu Miu, Helmut Lang, Jil Sander, Church’s and Car Shoe in Tokyo, New York, Beijing, Shanghai, Milan, Paris and Capri, respectively, in addition to a few franchised stores in the Mideast.

"We forecast a further significant development of the group for 2004," concluded Bertelli.

Prada currently has 247 sales points in 65 countries, around 7,000 employees and 19 production and distribution facilities. Last year, Italy accounted for 25 percent of sales, while the rest of Europe generated 24.9 percent and the U.S. 23.8 percent. Japan and the Asia Pacific area accounted for 15.5 percent and 10.8 percent, respectively.

Prada said that it had reduced its debt to $824.6 million versus a year-ago mark of $1.07 billion. As reported, in December 2001, Prada issued a $624.1 million bond, which, together with a capital increase, helped reduce the group’s debt. As reported, Prada last year postponed a possible initial public offering for the third time.

Hermes, meanwhile, reported an 8.3 percent advance in the final quarter at constant exchange rates. Hermès also said sales at airport concessions had showed signs of recovery and business in the U.S., where stores were expanded in November in Boston and Miami, had come back "sharply" in the fourth quarter.

For 2002, Hermes sales managed only a 1.3 percent increase, to $1.32 billion from $1.31 billion, as a result of the weakness of the dollar and the yen. Excluding currency fluctuations, sales for the year moved ahead 5.9 percent.

While ahead 10.3 percent for the year, retail sales were reduced by lower revenue at airport stores, particularly in Asia.

"On the whole, Hermès produced a wonderful result," said Andrew Gowan, equities analyst at Lehman Bros. in London. "It’s a best-in-the-class result in a soft sector and demonstrates the resiliency of the Hermès brand."
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