Two luxury handbags giants, both from Italy, are set for a financial duel. As the global economy continues to recover at a steady pace, both Italian groups are going in for an initial public offering in a bid to raise funds.
Prada’s upcoming Hong Kong listing has generated a lot of buzz over the last few weeks. The company would be looking to cash in on this publicity and raise a valuation of 28 times its predicted 2011 earnings. Salvatore Ferragamo will however remain true to its homegrown Italian brand image by heading to the stock market in Milan. Ferragamo is hoping to raise a valuation that is 21 times its predicted earnings for 2011. Both firms recovered well following the recession, with Ferragamo clocking a 26 percent rise in sales and Prada 30 percent.
Luxury industry watchers and potential investors will be following both these brands closely. Prada is listing 17 percent stake in the company. Funds raised will fund its expansion plans for China by way of new stores. The capital will also be utilized for debt reduction. The Hong Kong angle is a bid to further tap into the Asian market. Ferragamo, on the other hand, will be selling 23 percent shares to allow 60-plus family shareholders to exit the company.
Prada should do well in Hong Kong. French cosmetics group L’Occitane has been trading on 22 times its valuation and menswear distributor Trinity manages 26 times its valuation. However, the prices are significantly higher for luxury groups with Europe listings.
Meanwhile, Ferragamo is not ignoring its China presence. It opened 21 stores in China last year, and will be opening 10 more by end-2011. It is expected to increase its earnings here by 41 percent. This could tip the scales in its favor.