Prada, Miu Miu Desirability Continued to Build in 2023
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MILAN — The Prada Group reported a stellar performance in 2023 and chairman Patrizio Bertelli on Thursday expressed his confidence in “further growth and evolution.”
To be sure, 2023 gains in profitability and sales reflected a strong creative momentum, with a striking 58 percent gain at the Miu Miu brand, and solid business in Asia-Pacific and Europe, with an outstanding performance in Japan. On top of that, group chief executive officer Andrea Guerra said 2024 is off to a good start.
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“We are happy with the performance in January and February, in line with the trends of last quarter,” Guerra said during a call with analysts, seeing room to gain even more market share while the group will continue to fuel brand desirability without holding back on investments.
In the 12 months ended Dec. 31, Prada Group revenues rose 13 percent to 4.72 billion euros, compared with 4.2 billion euros in 2022. At constant exchange rates, sales rose 17 percent.
Net profit climbed 44.3 percent to 671 million euros, compared with 465 million euros in 2022.
Bertelli underscored the desirability of the group’s brands and the “high-quality growth in revenue and profits.” He said “innovation, dynamism and flexibility will be even more key to our success in 2024, and I am confident that our reinforced organization will be able to further evolve the group.”
Last year, retail sales amounted to 4.2 billion euros, up 12 percent compared with 3.73 billion euros in 2022. The group reported an acceleration in the fourth quarter, up 17 percent at constant exchange rates, compared with a 10 percent gain in the third quarter, reflecting solid underlying growth and an easier basis of comparison in China.
Retail sales of the Prada brand increased 12 percent to 3.48 billion euros, including 10 percent growth in the fourth quarter, accelerating on the third quarter across all categories. The increase was driven by full price like-for-like sales and solid growth across categories, genders and age groups.
In fact, the group reported 12 consecutive quarters of like-for-like growth, driven by full-price sales, said chief financial officer Andrea Bonini. This resulted in solid improvements in productivity, which Guerra said remains a key priority for the future. “Manufacturing and industrial platforms are the secret of success and offer flexibility, which is very important,” he said, ticking off the group’s innovative processes, “safeguarding unbelievable know-how and growing internal capacity.”
Miu Miu retail sales soared 58 percent to 649 million euros, supported by all categories and regions, ending the year with a remarkable 82 percent jump in the fourth quarter.
Guerra objected to an analyst comparing Prada to Miu Miu, and defining the latter’s growth as “exceptional.” The executive clarified that the brand’s performance is the result of a “longstanding journey” and that after “a slowdown for a couple of years, now it is recapturing” market share and customers, “going back to where it has to be. There are no exceptional things happening, it’s a moment where we have to keep our feet on the ground, be humble and not make mistakes. Prada doesn’t need more vigor, it has seen a like-for-like growth of around 75 percent, with a steady, strong growth that is expected from a larger brand.”
Bonini confirmed to an analyst that Miu Miu margins are below Prada’s as it’s “a matter of scale but [it’s taken a big] step forward.”
Guerra said the plan is not necessarily to open more Miu Miu stores but to expand its square footage in 2025 and 2026 in key locations around the world. Again responding to a question, he added that Miu Miu’s gains could not be based on one nationality or one product, touting a “really balanced growth, while seeing the highest velocity in Europe, which is important for progression in the future.”
At the group level, Guerra said “we have successfully delivered on our ambitions in 2023, with excellent performance achieved consistently through the year, as brand desirability grows stronger fueled by a combination of product, communication and retail initiatives.”
He admitted it was key to “remain with our feet on the ground, mindful of a high comparison base as well as persisting macro and geopolitical uncertainties. Against this backdrop, our priority for 2024 remains to drive brand desirability and retail excellence further. As with 2023, while quarterly growth trajectory may not be linear through the year, we retain our firm ambition of delivering solid, sustainable, above-market growth.”
Lorenzo Bertelli, marketing director and head of CSR, touted the elevation of Prada’s and Miu Miu’s rankings in top spots in the market, aiming to continue building on the existing strategies, “without mistakes,” and even more efficiently. “We have a very clear idea where to go.”
In 2023, retail sales in Asia Pacific grew 17 percent to 1.44 billion euros. At constant exchange rates, sales were up 24 percent, although the company considered the volatile basis of comparison in 2022, impacted by multiple lockdowns in China.
Bonini said spending by the Chinese cluster was “very good on a two-year stack, stable in the last two quarters and mainly local.” Guerra said there were many more Chinese in Japan and Europe in the past couple of months, “around 70 or 80 percent of what was in the past but we see more individual travelers, less tours.”
Sales in Europe increased 10 percent to 1.31 billion euros, driven by strong domestic and tourist spending.
Revenues in the Americas decreased 2 percent to 767 million euros, but were flat at constant exchange rates, showing a sequential improvement in the fourth quarter, supported by some repatriation of spending.
“I really hope the U.S. will be a fantastic good surprise in 2024,” said Guerra, and “there are a lot of reasons why it should be so — we are underrepresented and we did not always work efficiently there. There is a ton of work to be done, the U.S. have to be a kind of leading wagon.”
While there are “more positives than negatives,” the performance in that market is uneven. “Sometimes the east performs better than the west, sometimes it’s the other way around, sometimes it’s accessories, others not. Let’s see what happens, it’s a nervous momentum” in North America.
Japan was the best-performing region in 2023 with growth of 31 percent to 484 million euros driven primarily by local clients, and with increasing presence of tourists. At constant exchange rates, sales in Japan climbed 44 percent.
The Middle East delivered a solid performance in the year, up 8 percent, despite the intensified geopolitical headwinds.
Wholesale revenues rose 12 percent to 433 million euros. Royalties grew 36 percent to 104 million euros.
Sales of Church’s declined 13 percent to 29 million euros, while Car Shoe and Marchesi grew 19 percent to 24 million euros. Good progression was touted through the year at Church’s, with positive like-for-like performance and a negative impact from the store network reduction.
Asked again about plans for Church’s and Car Shoe, seen by analysts as distractions, Guerra said things were to be taken “step by step.” The company over the past two years restructured the Church’s business and network, he explained, as he described the brand as “an untold jewel,” adding that he hoped to soon return with good news about the brand.
Operating profit rose to 1.1 billion euros compared with 776 million euros, with a margin of 22.5 percent on sales.
When one analyst pointed out that the margin was below some of the group’s peers, Bonini said “the priority is growth above market, keeping a margin expansion is secondary to investments and we are not focused on the short term. No doubt there will be further margin expansion.”
Last year, capital expenditures totaled 753 million euros, compared with 276 million euros in 2022. This included around 130 renovation and relocation projects, accounting for around 80 percent of retail capex. The company opened 26 stores and closed 32, reaching a total of 606 directly operated stores at the end of 2023. The group invested 366 million euros in the building on 724 Fifth Avenue in New York that houses the Prada flagship, as reported.
The net cash position stood at 197 million euros.
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