Prada released its Q3 earnings in the mid-afternoon, Central European time, on October 30 and met analyst expectations for continued strong volume growth at Miu Miu.
Net revenues in Q3, compared with Q3 2023, were up 18 percent for the Prada Group. The Prada brand (which comprises just under 75 percent of group revenues) was up around the Q3 industry average of 2 percent while Miu Miu (around 25 percent of revenues) hit another remarkable growth number at 105 percent.
In terms of positive contributors to growth, the biggest contributor was volume growth at Miu Miu with pricing and mix making a small contribution for Prada. The observation was made that Prada has room to stretch pricing more across its range of products so that is something to have on the radar looking into next year.
Unlike most industry peers this earnings season, Prada Group reported balanced growth across geographies. Growth was in double digits across all regions lead again by Japan at 48 percent growth followed by the Middle East (36 percent), Europe (18 percent), Asia Pacific (12 percent), and the Americas (10 percent).
Forward guidance was for continued strong growth into H1 2025 unless there is a broader luxury market crash. Some specific observations were made during the earnings call:
* European growth continues to be resilient and dynamic, which is not the case for much of the industry and runs counter for the weak economic growth that is expected this year and next.
* Dynamics in the U.S. were described as being driven by dynamics consistent with pre-election periods. The meaning of this is not clear given strong consumer demand in the U.S., which has generally powered good luxury industry sales in H2 so far.
* Asia Pacific growth, ex China, has been rough this year but is expected to improve in the next 3-9 months. However, expectations are for continued weak growth in China into next year. The IMF lifted its 2025 economic growth forecast for China but consumer luxury demand seems like it will not rebound soon.
The extraordinary growth of Miu Miu is the result of strong creative decisions made by the brand, supported by the resources of the broader Prada Group.
Prada brand will continue to focus on improving margins by pursuing more cost efficiencies.
As the below chart details, the year-to-date return from Prada has significantly outperformed our FSW Markets All Luxury Index throughout the year and outperformed the S&P 500 on its strong year. Despite this strong growth, Prada continues to look like a good value with a P/E ratio of about 20x as compared with 22x for LVMH and 46x for Hermès.