The Scenario May Be Different, but Prada Group Continues to Grow
Group CEO Andrea Guerra said “sharpness of positioning, creativity and communication will be critical this year, when we will observe a different kind of market and trends."
By
LUISA ZARGANI
APRIL 24, 2024, 2:09PM
MILAN — The Prada Group continued to grow across all key regions and at its own stores in the first quarter of the year, but chief executive officer Andrea Guerra remains grounded.
Despite a 7 percent retail gain of the Prada brand and an 89 percent jump at Miu Miu, the executive said “a long journey is still ahead of us.”
During a call with analysts on Wednesday, Guerra said “sharpness of positioning, creativity and communication will be critical this year, when we will observe a different kind of market and trends. As anticipated, the rest of the year may see a nonlinear quarterly growth trajectory, but our ambition remains to deliver solid, sustainable and above-market growth.”
The Italian luxury company on Wednesday reported a sales increase of 11 percent to 1.18 billion euros in the three months ended March 31. This compares with 1.06 billion euros in the same period last year. At constant exchange rates, revenues grew 16 percent.
“Our group continues to make strategic progress as we invest for long-term, sustainable growth,” stated Patrizio Bertelli, Prada Group chairman and executive director. “Over the first quarter we delivered a solid performance in a more challenging market environment. In this context, we have to maintain flexibility and agility to respond to constantly evolving industry dynamics while continuing to innovate and invest across our business, leveraging the strength of our reinforced organization and the talent of our people.”
During the call, Guerra said the current trend is “similar to the past six to eight months,” adding that “growth is not constant but with sudden accelerations and decelerations. April is more or less like the first quarter,” and he underscored that “the second quarter last year was the largest one in terms of the percentage of growth.”
Guerra defined
Prada as “an industry cultural shaper, that will be shaping the future.”
Chief financial officer Andrea Bonini said that a “priority is to invest in brand desirability, solid and sustainable growth, retail activations, infrastructure and the organization, continuing on the path of verticalization. Miu Miu is seeing an exceptional momentum, and there is more to do to strengthen its foundations.” He admitted it was “challenging to balance being dynamic, reactive and investing to take market shares while maintaining progressive margin expansion, but we reiterate our ambitions for 2024.”
When one analyst asked about rumors of a potential triple listing, both Bonini and Guerra chuckled at the notion. The former responded, saying that “a triple listing is not on the table and a double listing is on the agenda but not a priority due to other priorities. We are not in a position to give an update.”
The group did not break down sales by product category and, as analysts asked about this, both executives said that leather goods was the segment that grew the most from the last quarter of 2023 and in the first quarter of 2024. This “in a world where the category has been sluggish” over the past year and into 2024, Guerra said. With leather goods, it’s key “to nurture icons and be bold with new styles.” He said the “traction is there” and that the new Prada Galleria bag launched 15 days ago, is sold out.
In the first quarter, the Prada brand registered a 7 percent gain in retail sales to 826 million euros and Miu Miu was up 89 percent to 233 million euros.
In the period, Prada experienced “solid and above-market growth against a high quarterly basis of comparison,” said Guerra, and “Miu Miu’s strong performance is a testament to the strategy and disciplined execution implemented over the past years.”
Group retail sales rose 12 percent to 1.07 billion euros compared with 953 million euros in the same period last year, driven by like-for-like and full-price volumes. At constant currency, retail sales were up 18 percent.
Guerra said the plan is to add 10 to 15 Miu Miu stores and five to 10 Prada stores in 2025.
Wholesale revenues slipped 1 percent to 90 million euros, compared with 91 million euros in the same period last year.
Royalties rose 22 percent to 25 million euros compared with 21 million euros last year, boosted by eyewear and fragrances.
Asked about the potential of the Prada beauty license with L’Oréal, which took effect in January 2021, Guerra said Prada eyewear is “the number one or two in eyewear in the world [with EssilorLuxottica], can this happen in beauty? Probably not, it’s an unbelievable long journey but so far it’s been well above our and L’Oréal’s expectations. Fragrances are moving fast, Luna Rossa for men and Paradoxe for women are escalating the ranks. We are not looking for the money but for a different moment and a different kind of consumer, more people entering at a different price level.”
A license with L’Oréal for Miu Miu products was signed in February.
Responding to an analyst wondering how the group could sustain the growth of Miu Miu, which could potentially reach sales of 1 billion euros at this pace, and keep up with the production and the demand, Guerra said “it’s a nice problem to have.”
He concurred with the analyst that it would “unrealistic” to expect the same pace of expansion for the brand. “To achieve profits that grow more than proportionally is an object. Obviously we are trying our best to make the growth structural, and the roots grow solidly, building on different nationalities, product categories and ages, with the same creative director with unbelievable creativity and a progressive attitude.”
Guerra added that Miu Miu is underrepresented in North America, although the strong growth trajectory was achieved across well-balanced geographies. “The brand is getting back its positioning but it is still a long journey.”
Miu Miu’s fall 2024 show contributed to “driving brand desirability further. Leather goods continued to be received very positively by clients, with both new lines [Ivy and Softy] and icons [Arcadie and Wander] performing well, also supported by dedicated campaigns,” the company said. In addition, Miu Miu’s collaborations with Church’s and New Balance “contributed to give further dynamism” to the identity of the brand.
At group level, all geographic markets showed retail sales growth. Asia Pacific was up 10 percent to 396 million euros despite the comparison with a quarter last year that saw the reopening of stores after the pandemic.
“Finally in this period the Chinese are traveling abroad, to Japan, Paris, Milan and more,” said Guerra when asked about this cluster. “They are more individuals traveling [rather than groups], in the upper side of the consumer base, they are not many but they are big spenders. They are spending more outside of China, but we are not back to 2019, there is a 20 to 30 percent gap versus 2019.” He also remarked on how spending is based on “tourism rhythm,” and not constant, as there was a slow start to the quarter “but then a great period of 45 days and a slowdown after Golden Week.”
Revenues in Europe rose 14 percent to 295 million euros, supported by both domestic and tourist spending. The Americas were up 4 percent to 181 million euros. “I have high expectation on the U.S.,” Guerra said.
He added that the group has been “serving more Chinese outside China and less Americans in the U.S.” Sales in Japan climbed 29 percent to 145 million euros, sustained by local consumption and increasingly by tourists. At constant exchange rates, sales in Japan jumped 46 percent. Revenues in the Middle East rose 15 percent to 54 million euros.
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