Prada shares jump as sales surge in sign of luxury-market divide

By Kimberley Kao

Prada shares rose in Hong Kong after the Italian luxury-fashion giant reported strong sales and revenue growth, driven by the surging popularity of its Miu Miu brand and a resilient performance in Europe and Japan despite weaker Chinese consumer spending and an overall sector slowdown.

Shares in Prada (HK:1913) rose as much as 8.4% before paring gains to trade 5.75% higher by Wednesday afternoon.

The company on Tuesday reported a 17% rise in first-half revenue and double-digit growth in retail net sales in most regions compared with the prior-year period.

Prada's results are the latest sign of a divide in the luxury industry, which analysts said has had a volatile first-half reporting season.

Its performance contrasts with that of some of its peers, which flagged declines in Asia-Pacific due to waning demand in the key Chinese market.

"Prada's industry-beating growth despite no major space impact and minimal pricing support sets the shares apart from a tough luxury industry," Jefferies analysts said in a research note.

Prada did note a further slowdown in spending in the Chinese market, they said, but that was offset by the strong performance across Europe and Japan. High demand for Miu Miu, Prada's luxury brand aimed at younger clientele, will help drive earnings, at a time when the Italian fashion house is near its peak valuation, they said.

Jefferies upgraded the stock to buy from hold and raised the target price to HK$67.00 from HK$62.00.

Citi research analysts attributed strong sales overall to the outsize growth of the Miu Miu brand, which nearly doubled sales from a year earlier.

However, they cautioned that any major change in the economic outlook in Europe and Asia could affect luxury consumer demand and pose a downside risk for the group's performance.

Morningstar said it believes Prada's stock is fairly valued.

Prada's brand sales outperformed peers, given that it reported a "rare sequential acceleration from the first quarter," compared with most other luxury companies, which reported a deceleration, senior equity analyst Jelena Sokolova said in a note.

Its Miu Miu brand will likely reach EUR1 billion in revenue this year, Sokolova said, and has further potential for higher recognition, particularly in the U.S.

Write to Kimberley Kao at kimberley.kao@wsj.com

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07-31-24 0325ET

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