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Prada Group revenues grew 17 per cent at constant exchange rates to €3.34 billion for the nine months ending 30 September 2023, as Miu Miu’s strategy has started to bear fruit and Prada maintains its momentum. Sales growth slowed in the third quarter, in line with the wider market, but the company remains positive heading into the holiday season.
Prada Group’s performance was boosted by its ongoing strategy to shrink its wholesale business and invest in its direct retail channels. Full-price retail sales at Miu Miu jumped by 49 per cent in the nine-month period, while the Prada brand was up 13 per cent, bringing the group total to €2.98 million, a 17 per cent year-on-year increase.
Group retail sales growth slowed to 10 per cent in the third quarter, group CFO Andrea Bonini told analysts on a call. Q3 sales of the Prada brand grew 5 per cent — a “more moderate and solid pace compared to the first half, due to the very challenging basis of comparison particularly in Europe”, he said. Miu Miu sales grew 48 per cent for Q3, and was “well spread” across regions and categories. Its contribution to group retail sales increased 15 per cent, according to Bonini.
“Our strategy delivered solid growth in the first nine months of 2023, including in the third quarter, notwithstanding the very challenging basis of comparison. The group continued to consolidate its brands’ desirability and accelerated investments as planned,” said Prada Group chairman and executive director Patrizio Bertelli in a statement.
All product categories performed strongly across the nine months, driven by ready-to-wear (up 32 per cent) and footwear (up 16 per cent). Leather goods, where Prada has been focused on strengthening its icons such as the Galleria, grew 8 per cent. Miu Miu continued to have “outstanding” momentum, according to the group, thanks partly to the positive reaction to its recent collections, as well as sustained growth across all categories including leather goods. Bestsellers include the Wander and Arcadie bags.
“[Miu Miu] is a brand that is in good health. It’s a brand that is in a position where the consumer is today, and I think that with the designer style as well as interpreting this attitude, the team is doing a great job,” Prada Group CEO Andrea Guerra told analysts on Tuesday. “Obviously, we have room to continue to improve. We’re not [ahead] of everything. We are catching up and still have a journey to go.”
The profitability gap between Prada and Miu Miu is narrowing, according to Bonini. While Prada remains ahead in terms of brand EBIT margin, Miu Miu had a “very positive trajectory” last year and continues to accelerate this year, he said. “It’s a very positive step forward for Miu Miu. You also have to consider the average size of a Miu Miu store, which is more than a Prada store, so productivity gets very interesting.”
Asia Pacific, Japan and Europe drove growth for the group throughout the nine-month period (sales were up 21 per cent, 47 per cent and 17 per cent, respectively). The Middle East also grew 12 per cent. On the analyst call, Guerra highlighted high single-digit growth in Europe in Q3, thanks to the return of Chinese travellers.
Executives and analysts have identified America as a weak spot for luxury, with sales slipping back after a period of post-lockdown euphoria. Prada Group’s US sales dipped 1 per cent in the nine-month period.
While some consumers might be more cautious about spend, Guerra believes the group can “achieve a larger range of prices going upwards” rather than downwards. “Obviously, it depends on our ability to make our brands even more desirable, our stores even more comfortable, and our people even more practised. I think that that is the real opportunity that we have.”
Prada’s results confirm “solid progress”, with growth slightly ahead of estimates, according to a note from Jefferies equity analyst James Grzinic. “Very strong brand heat in China (and Miu Miu in particular) is a key differentiator for Prada, and this could provide reduced earnings risks compared to peers.”
The third quarter saw the launch of Prada’s makeup and skincare lines. Guerra said there are no plans to licence other categories besides beauty and eyewear. “Eyewear is a super business, as ever. The relationship with Luxottica [which holds the group’s eyewear licences] is pretty good.” As for beauty, the brand is “at the beginning” of what feels like “a startup phase”, he says. “Hopefully in the next two to three years, we will see great growth and a little more normalisation. Prada is not really yet visible, but the plans with L’Oréal are fantastic and very clear. We will be popping up here and there in the world, in the main department stores and travel retail.”
Prada is among the highest-performing luxury companies when it comes to top line growth progression year-to-date, writes Luca Solca, senior luxury analyst at consultancy Bernstein. He questions whether Prada’s progression will be “enough to support the stock”, as “markets are nervous about full-year 2024 uncertainty for the sector, and have reacted very negatively even to very small negative surprises”.
“This quarter was the toughest quarter for us in terms of comparison, and I think that we have achieved a little bit more of what we were thinking to achieve,” said Guerra. However, the group is bracing for ongoing macro-environmental challenges. “Our toughest period has gone [but] I can say that eventually we will be in another period of turbulent tensions,” he said.
The key, said Guerra, is to “move on and continue to invest”. He explained: “Everything has to be better executed. We have to be more focused and precise in all our activities.” Prada and Miu Miu are both “working on the quality of people” through “training, motivation, routines, KPIs and things that make the clientele happy”, said Guerra.
He emphasised the need to “stay humble” and have “no complacency”. “Now that we’re all moving towards the very important holiday season — it is starting as we talk — we will continue to perform above industry average. Today, we are beginning to plan for 2024 and we are hoping to conclude another solid year in 2023.”
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