How Prada Is Defying the Downturn

Prada Group continues to defy luxury’s downturn, reporting nine-month net revenues up 18 percent year-on-year.

Growth was powered by Miu Miu, whose wonky yet wearable designs wrapped in a message of empowered girlishness for all ages fuelled rapid growth. Retail sales more than doubled in the third quarter, rising 105 percent year-on-year.

Prada’s retail sales slowed compared to the first half of the year, but remained in positive territory. Third-quarter retail sales rose 2 percent year-on-year, slower than analysts had expected but more than offset by the rapid growth at Miu Miu (whose growth beat consensus expectations by nearly 44 percentage points).

Investors are likely to keep a close eye on deceleration at the group’s bigger and more profitable main line. “Prada – which is still the very bulk of the business – could be well past its peak growth potential,” Bernstein analyst Luca Solca said in a note to clients.

The group’s emphasis on innovative products and marketing activities that maintain its cultural clout has helped the group to continue to outperform rivals in a slowing luxury market, which has seen sales sputter for even the industry’s biggest and most powerful players. LVMH reported fashion sales down 5 percent in the third quarter; Gucci owner Kering’s revenues plunged 15 percent.

Prada, Hermès and Brunello Cucinelli are the only brands to have reported rising sales this quarter.

In a call with investors, chief executive officer Andrea Guerra underscored the group’s “polyhedric brand equity,” referring to multi-faceted marketing activities that range from fashion shows to literary talks, art installations and partnerships with A-list stars from cinema and music, as well as nearly three decades of sports marketing through its sponsorship of the Luna Rossa sailing team that represents Italy in the America’s Cup.

Prada “continues to constantly and positively carve the cultural landscape,” Guerra said. “This longterm trajectory of Prada will continue to pay off. On the other side, Miu Miu’s positioning and distinctive identity is now very clear, and very liked by the global audience.”

“We’re confident to finish the year with a solid and sustainable growth above-market,” Guerra added.

Miu Miu, Miuccia Prada’s smaller label dedicated to free-spirited and playful femininity, has seen sales soar since a push to revamp its runway collections and remerchandise stores over the past three years. Working with stylist Lotta Volkova, the brand has transitioned to a wardrobe that is at once more wearable — many pieces are riffs on classic collegiate style — and more twisted, with pleated skirts cut off ultra-short, or pants slung low around the hips to expose logoed panties.

The aesthetic projects confidence and independence without undue seriousness — a message women worldwide have sought to align themselves with by sporting the brand’s mini-bags, biker boots, ballet flats, sunglasses and head-to-toe ready-to-wear looks in greater numbers than ever before.

Third-quarter retail sales of €321 million more than doubled year-on-year. The eye-popping expansion is all the more impressive as it comes on top of 58 percent growth in 2023.

Still, turnover remains roughly a third the size of Prada’s. “We’re growing fast but always keep in mind that in absolute terms the numbers are not so big,” Guerra said.

“The market is under-appreciating the growth that Miu Miu can generate in the next 12 to 18 months,” Solca echoed in a note to clients.

Guerra said the group aimed to keep gaining market share in a rocky market through store extensions as well as by retooling its store experience, clienteling and product offer to appeal to top-spending clients. As less-wealthy, occasional luxury buyers struggle to digest steep price hikes across the sector, Prada says it will focus on “stretching” its price range upward while limiting across-the-board increases to low single digits.

“We have always been a little bit too short with our price range,” Guerra said. “We will continue to maintain our price structure with low single digit [increases] every five or six months. But on the other side, the real value to us comes in stretching our price range. I think that that is the real gold mine.”