Designer handbags, shoes, accessories has been the trade mark for the rich and famous. However this has changed thanks changes in fashion, style and overall disposable income. A brand prominently known in the U.S. and Europe has decided to enter the emerging Asia maket vigorously.
The Italian luxury fashion house Prada released on Sunday 11th that it was targeting stronger Asian growth as it aims to raise as much as US$3 billion from a highly anticipated share sale in Hong Kong this month.
Prada and its banker Goldman Sachs executives said they think individual investors in Hong Kong will be enthusiastic when the local part of the initial public offering begins this week.
Prada, which also owns the Miu Miu, Church?s and Car Shoes brands, is the latest in a string of foreign companies to list in Hong Kong this year as they seek to tap economic growth in Asia and raise their brand awareness.
However, sliding stock markets around the globe have made it hard for another international listing, Samsonite International S.A., to reach its maximum valuation. The luggage maker, which is also going public in Hong Kong this month, priced its shares last week at the lower end of the proposed range, indicating waning investor interest. Fears that the global economic recovery has stalled have driven investors out of the market and sent stocks lower around the world.
Hong Kong IPO
?Despite recent market turmoil, the Prada team is very optimistic,? said Mary Koo, an executive director in Goldman Sachs? consumer retail division. Goldman is one of the investment banks working on the deal.
?We don?t feel the stress,? added Carlo Mazzi, Prada?s deputy chairman, who spoke to reporters in Hong Kong via videolink from Milan. Neither Mazzi nor Koo would disclose specific details about investor interest.
The Prada and Goldman executives also shrugged off concerns about the IPO?s relatively high valuation and the Italian capital gains tax.
The family-owned fashion giant, known for its high-end leather handbags and footwear, is planning to sell 423.28 million shares at a price range of HK$36.50-HK$48.0 (US$4.70-6.20) each, with trading slated to start on June 24.
The Milan-based firm has an option to sell an additional 63.49 million shares, or 15 percent of the offering, if the shares are oversubscribed which will enable it to raise up to $3.0 billion.
Investors also face an Italian capital gains tax of 12.5 percent on any profits from selling their shares, an unusual situation in Hong Kong, which does not tax capital gains.
Prada?s main shareholders, President Miuccia Prada and her family, who own 94.9 percent, and Italian bank Intesa Sanpaolo, which owns 5.1 percent, will also profit handsomely. The other 86 percent of the shares in the IPO will come from their stakes.
?We expect that with a brand name like Prada, with this growth story and with this valuation, we expect the Hong Kong retail (portion) to be very enthusiastic,? Koo said.
Prada had discussed going public several times in the past, with the most recent attempt delayed after the world financial crisis in 2008 sent markets tumbling.
Prada launched into Homg Kong by keeping the biggest consumer market in mind, CHINA!
China is the worlds largest fastest growing market for luxury goods. It is forecast to be the world’s top buyer of products such as cosmetics, handbags, watches, shoes and clothes by 2015, according to consultancy PriceWaterhouseCoopers.
The Chinese consumers, just like the rest of world love shopping and purchasing designer products.
“I am confident we made the right decision,” its chief executive Patrizio Bertelli told a news conference in Hong Kong via videolink from Milan, describing Asian fashion sense as “far more contemporary” and “younger”.
“We will be the first luxury brand to go public on the Hong Kong stock exchange. In fact we will be the first Italian company to go public on the Hong Kong stock exchange,” he said through an interpreter.
Prada’s confidence came as company executives said they were planning to open 80 new stores worldwide annually for the next three years, including 10 to 12 additional shops per year for its fast-growing Chinese market.
Fuel for stores
Prada prides not only on its products which are absolutely fabulous, but also on its store interiors. Each store has a trademark store interior which is not a cheap commodity. Many consumers in Asia enter a store not only because of the brand name but also the level of comfort they feel whilst in the store.
Prada plans to use proceeds from the Hong Kong IPO to expand its sales network, increase floor space, repay bank loans and supplement working capital.
The fashion powerhouse currently has stores in more than 70 countries, with 319 shops in total — about a third of them in Asia.
The company was founded in 1913 in Milan by Mario Prada and started out making leather bags, trunks and crystal. Today the company is known for its stylish leather handbags and modern designs for clothing and footwear that have helped it become a symbol of high fashion.
But the center of gravity in the fashion world is shifting east, said CEO Patrizio Bertelli, who is also Miuccia Prada?s husband.
?I wouldn?t really focus on Europe as a source of inspiration today,? he said. ?The Asian markets are far more contemporary than us.?