Prada adds nearly $3 billion in market cap after 44% earnings surge

By Andrea Figueras and Mauro Orru

Prada gained about $2.70 billion in market value after annual profit and sales surged past analysts' expectations, outperforming other European luxury-goods firms that are grappling with a slowdown in the industry.

Hong-Kong-listed shares in the Italian luxury-fashion giant (HK:1913) closed almost 15% higher at HK$63.90 Friday according to FactSet, handing Prada a market value of nearly HK$163.51 billion, equivalent to about $20.91 billion.

Prada posted a 17% increase in 2023 revenue on a constant-currency basis, while net profit jumped 44% compared with 2022, the company reported on Thursday. Sales and earnings beat analysts' expectations, according to a consensus from Visible Alpha.

Customers splurged on Prada's namesake and Miu Miu brands. Retail sales, which account for the lion's share of Prada's revenue, climbed 17% at constant exchange rates. Retail sales in the Asia-Pacific region jumped 24%, with Japan reporting 44% growth.

"The group's year-end performance continued to benefit from the recovery in Chinese tourist spending in domestic destinations such as Hong Kong and Macau, as well as neighboring Asian countries," AlphaValue analyst Jie Zhang wrote in a note to clients.

Prada's performance comes after other European luxury-goods giants-particularly those most exposed to high-end consumers-also said they are seeing improving trends following months of slowing sales across the industry.

Last month, Birkin bag maker Hermes (FR:RMS) said it was confident for 2024 after reporting a surge in fourth-quarter sales, helped by its exposure to wealthy consumers. Richemont (CH:CFR) and Brunello Cucinelli also benefited from a wealthier customer base.

Conversely, both Salvatore Ferragamo (IT:SFER) and Burberry (UK:BRBY) posted lackluster results, while Hugo Boss (XE:BOSS) disappointed with lower-than-expected forecasts for 2024.

Gucci owner Kering (FR:KER) said its profit would take a hit this year from planned investments in its fashion houses, as it aims to reinvigorate its core brand.

Big-spending shoppers splurged on high-end handbags, jewelry and garments after the height of the pandemic, fueling years of strong results across the luxury-goods industry. However, sales growth slowed last year as the effects of pandemic-era restrictions, combined with the war in Ukraine, gave way to high inflation and rising interest rates that weighed on a younger, less affluent clientele.

China's economic woes added to the wider slowdown. The country was the world's largest luxury market before the pandemic. However, China's economy has been suffering from a prolonged downturn in the property sector as well as weak exports and consumer demand.

"Looking ahead, we are mindful of this 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," Prada Chief Executive Andrea Guerra said.

Write to Andrea Figueras at andrea.figueras@wsj.com and to Mauro Orru at mauro.orru@wsj.com

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03-08-24 0812ET

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