Company Reports

Prada Group's net revenue grew 7% organically at constant currency and 18% including Versace for the second quarter, with sequential improvement in most regions, though the Middle East remains a drag.

Prada reported 3% organic growth in the first quarter, with Prada sales flat and Miu Miu up 2%. Versace, consolidated for the first time, pulled total sales growth to 14% in constant currency.

Prada is one of the most recognised and best-loved luxury brands and is an important design authority. It has developed a global retail network of over 600 stores for Prada and Miu Miu, many of which are in important travel locations. Control over distribution strengthened the company's brand moat—showcasing the brand, avoiding excessive discounting, and maintaining strong negotiating clout with wholesalers. As the retail infrastructure has been built out and new demand comes from existing stores, operating costs should be leveraged. Management's initiatives, such as rationalization of wholesale channels, discount reduction, increased digital investments, and investments in marketing, as well as increasing vertical integration and streamlining manufacturing, are putting the brand on a stronger footing and reinforcing its moat. The effect of these actions, alongside improved brand momentum, is showing in improved sales and profitability trends from 2021 through 2025, in our view. We believe the company is well positioned to grow revenue by 4%-5% over the next 10 years, accompanied by operating margin expansion to the low- to mid-20s, thanks to its brand strength, and general luxury industry expansion (helped by a rise in global incomes), as well as operating leverage, as its store densities improve. We do expect recent brand momentum, which has been helping performance over the past five years, to cool, as brand appeal is cyclical. In our experience, it lasts around five years, and started in 2020 for Prada.

In fiscal 2025, Prada delivered 8% organic sales growth excluding Versace, while operating margin softened slightly year on year, reflecting the dilutive impact of the Versace consolidation.

Luxury sector shares were down by 1%-7% on March 2 following the US and Israeli attacks on Iran and Iran's retaliatory attacks on Israel and US bases across the Middle East (United Arab Emirates, Saudi Arabia, Qatar, Kuwait, and Bahrain).

Prada is one of the most recognised and best-loved luxury brands and is an important design authority. It has developed a global retail network of over 600 stores for Prada and Miu Miu, many of which are in important travel locations. Control over distribution strengthened the company's brand moat—showcasing the brand, avoiding excessive discounting, and maintaining strong negotiating clout with wholesalers. As the retail infrastructure has been built out and new demand comes from existing stores, operating costs should be leveraged. Management's initiatives, such as rationalization of wholesale channels, discount reduction, increased digital investments, and investments in marketing, as well as increasing vertical integration and streamlining manufacturing, are putting the brand on a stronger footing and reinforcing its moat. The effect of these actions, alongside improved brand momentum, is showing in improved sales and profitability trends from 2021 through 2025, in our view. We believe the company is well positioned to grow revenue by 4%-5% over the next 10 years, accompanied by operating margin expansion to the low- to mid-20s, thanks to its brand strength, and general luxury industry expansion (helped by a rise in global incomes), as well as operating leverage, as its store densities improve. We do expect recent brand momentum, which has been helping performance over the past five years, to cool, as brand appeal is cyclical. In our experience, it lasts around five years, and started in 2020 for Prada.

Prada's sales grew 9% at constant currencies in the third quarter, marking the 19th consecutive quarter of growth.

Prada reported its half-year results, with net sales up by 9% and operating profitability remaining steady year over year.

Prada is one of the most recognised and best-loved luxury brands and is an important design authority. It has developed a global retail network of over 600 stores for Prada and Miu Miu, many of which are in important travel locations. Control over distribution strengthened the company's brand moat—showcasing the brand, avoiding excessive discounting, and maintaining strong negotiating clout with wholesalers. As the retail infrastructure has been built out and new demand comes from existing stores, operating costs should be leveraged. Recent management's initiatives such as rationalization of wholesale channels, discount reduction, increased digital investments, and investments in marketing, as well as increasing vertical integration and streamlining manufacturing, are putting the brand on a stronger footing and reinforcing its moat. The effect of these actions alongside improved brand momentum is showing in improved sales and profitability trends in 2021 through 2024, in our view. We believe the company is well positioned to grow revenue by 4%-5% over the next 10 years, accompanied by operating margin expansion to the low- to mid-20s, thanks to its brand strength, and general luxury industry expansion (helped by a rise in global incomes), as well as operating leverage, as its store densities improve. Revenue increases over the next few years should be stronger and better than luxury industry, helped by supportive brand momentum, which is in turn helped by the fashion cycle, and in our experience lasts around five years and started in 2020 for Prada.

Prada group continued outperforming luxury peers in revenue growth in the first quarter, driven by Miu Miu's brand popularity, as Prada brand revenue flatlined.

We are maintaining our fair value estimate for narrow-moat Prada after it announced its acquisition of the Versace brand from Capri for EUR 1.25 billion. We view the transaction price as fair based on our estimates for Capri’s revenue and profitability development.

We are maintaining our fair value estimates for stocks in our luxury coverage following the announcement of reciprocal tariffs by US President Donald Trump. Tariffs of 20% on the European Union, 10% on the UK, and 31% on imports from Switzerland are having the most impact on our coverage (as well as 36% tariffs on Thailand for Pandora, where most of its manufacturing takes place). Americans account for around 30% of global luxury consumption and sales exposures in the Americas for companies under our coverage range from the midteens to high 30s. Moncler, Prada, and Swatch are least exposed; EssilorLuxottica, Brunello Cucinelli, and Pandora are most exposed.

We are maintaining our fair value estimate for narrow-moat Prada as the company reported strong revenue and profit growth in 2024, largely in line with our expectations. The shares look expensive at current levels.

We maintain our fair value estimate for narrow-moat Prada as we increase our forecasts for full-year revenue and profits on the back of a strong third quarter. Our increased near-term expectations are offset by currency moves and our long-term expectations are intact as we don’t expect current industry outperformance to last.

We are maintaining our fair value estimate for narrow-moat Prada even as we expect to increase our fair value for revenue and profit growth this year on the back of continuing strong momentum (seen in the first-half results). Shares are trading broadly in line with our fair value estimate.

Prada is one of the most recognised and best-loved luxury brands and is an important design authority. It has developed a global retail network of over 600 stores for Prada and Miu Miu, many of which are in important travel locations. Control over distribution strengthened the company's brand moat—showcasing the brand, avoiding excessive discounting, and maintaining strong negotiating clout with wholesalers. As the retail infrastructure has been built out and new demand comes from existing stores, operating costs should be leveraged. Recent management's initiatives such as rationalization of wholesale channels, discount reduction, increased digital investments, and investments in marketing, as well as increasing vertical integration and streamlining manufacturing, are putting the brand on a stronger footing and reinforcing its moat. The effect of these actions alongside improved brand momentum is already showing in improved sales and profitability trends in 2021 through 2023, in our view. We believe the company is well positioned to grow revenue by 5%-6% over the next 10 years, accompanied by operating margin expansion to the low- to mid-20s, thanks to its brand strength, and general luxury industry expansion (helped by a rise in global incomes), as well as operating leverage, as its store densities improve. Revenue increases over the next few years should be stronger and better than luxury industry, helped by supportive brand momentum, which is in turn helped by the fashion cycle, and in our experience lasts around five years and started in 2020 for Prada.

We are maintaining our fair value estimate of HKD 51 per share for narrow-moat Prada as the company reported strong first-quarter sales boosted by continuing positive brand momentum. We believe shares are fairly valued, trading at 24 times forward earnings. We think its current performance is helped by the favorable fashion cycle, which we don’t extrapolate being longer than a few years as fashion cycles tend not to last and sometimes revert themselves. For example, the poor performance of Prada from 2014-19 and Kering’s Gucci weakness currently.

We maintain our fair value estimate for narrow-moat Prada at HKD 51, with the company reporting EBIT of EUR 1.062 billion, aligning closely with our estimate. The gross margin reached 80%, marking a 160-basis-point increase year on year, underpinned by improvements in average pricing, channel mix, and enhanced scale. Notably, the company demonstrated significant progress in profitability, with EBIT growing by 26%, despite operating expenses rising by 15% at constant exchange rates, mainly attributed to increased marketing expenditure, variable costs, and labor expenses. For 2024, the company expects to deliver above-market growth.

Prada is one of the most recognised and best-loved luxury brands and is an important design authority. It has developed a global retail network of over 600 stores for Prada and Miu Miu, many of which are in important travel locations. Although dilutive to returns currently (return on invested capital currently at 9%, versus 13.6% in 2013), control over distribution strengthened the company's brand moat—showcasing the brand, avoiding excessive discounting, and maintaining strong negotiating clout with wholesalers. As the retail infrastructure has been built out and new demand comes from existing stores, operating costs should be leveraged. Recent management's initiatives such as rationalization of wholesale channels, discount reduction, increased digital investments, and investments in marketing, as well as increasing vertical integration and streamlining manufacturing, are putting the brand on a stronger footing and reinforcing its moat. The effect of these actions alongside improved brand momentum is already showing in improved sales and profitability trends in 2021 and 2022, in our view. We believe the company is well positioned to grow revenue by 5%-6% over the next 10 years, accompanied by operating margin expansion to the low-20s, thanks to its brand strength, and general luxury industry expansion (helped by a rise in global incomes), as well as operating leverage, as its store densities improve. Revenue increases over the next few years should be stronger and better than luxury industry, helped by supportive brand momentum, which is in turn helped by the fashion cycle, and in our experience lasts around five years.

We maintain our fair value estimate for narrow-moat Prada Group at HKD 48 per share as the company reported solid sales numbers for the first nine months. Like other luxury peers, Prada Group has seen a meaningful deceleration in the third quarter with 10% growth (broadly in line with peers like LVMH with 9% growth for its fashion and leather goods division and 9% growth for Moncler), compared with around 20% growth delivered in the first half. We believe Prada Group should be among the top luxury performers over the near term on strong brand momentum. That said, we see shares as fairly valued at current levels.