Yahoo Lifestyle Prada Group Sees Robust Growth in 2024, Management Mum on Potential Versace Acquisition
MILAN — The Prada Group isn’t talking about Versace.
Reporting another year of growth on Tuesday, with sales rising 15 percent to 5.43 billion euros and net profit climbing 25 percent to 839 million euros, the fashion group’s management broadly commented on the performance with analysts but expertly dodged their burning questions about the potential acquisition of Versace.
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“I think that we’ve been always very, very clear,” said group chief executive officer Andrea Guerra during the conference call. “On the one side, we are 100 percent totally focused on our brands. On the other side, when things come around, you always look at them. I don’t think you need to be arrogant and not look at them.”
Capri Holdings has reportedly put Versace and Jimmy Choo up for sale and, as reported, sources said Prada Group is in exclusive due diligence with Capri about buying both brands and has until about mid-March to conclude a deal, if one is finalized. Prada could in turn flip Jimmy Choo to another buyer to focus on Versace, and Tamara Mellon is said to be interested in the brand she cofounded.
Prada chief financial officer Andrea Bonini said the group does not comment on rumors. However, when one analyst addressed how Prada in the ‘90s first tried to build a multibrand luxury conglomerate, Bonini underscored that, “speaking in a hypothetical case [of buying Versace and Jimmy Choo], I think a number of things are different. I mean, many years have passed, it’s a different company, in a different scale, there’s a different team, there are so many differences, and I will leave it at that.”
Prada back then bought stakes in Fendi, Jil Sander, Helmut Lang and Azzedine Alaïa with varying degrees of success and sold them all over the years.
During the call, Guerra and Bonini said that investing in the Prada and Miu Miu brands will remain the priority. “We will continue to invest in marketing and retail initiatives to drive long-term brand desirability, meaning that we will not cut back on marketing to protect short-term margins. Ideally, we would like to maintain a trajectory of progressive, even if moderate margin expansion year-over-year. But the priority is to grow and generate more meaningful operating leverage in the mid- to long-term.”
The group reported a net cash position of 600 million euros, soaring up from 197 million euros in 2023.
Capital expenditure totaled 493 million euros, compared with 753 million euros the previous year.
Bonini said the group expects retail and industrial capex to increase to around 550 million euros in 2025 “because we want to mindfully shift more focus to new space, after years of the stability or slight decline in retail square footage, and very importantly, as we continue also to strengthen our industrial footprint, both organically and, as we’ve done in the past, through relatively small but very strategic M&As.”
Analysts Comment on Potential Versace and Jimmy Choo Deal
Thomas Chauvet at Citi said that, “while Versace’s bold, jet-set lifestyle aesthetics may not be fully aligned with the spirit of the times (and the success of many “quiet luxury” brands in the marketplace), it could well complement Prada Group’s portfolio with a third major brand offering a distinct positioning, geographic and product immaturities and turnaround optionality.“
He contended Prada’s balance sheet “would not be particularly stretched, with net debt/EBITDA of 0.4x estimated” and that the bank sees “management as capable of fixing and repositioning [Versace] in the medium-term by broadening the customer demographics, reinforcing the brand’s iconic lines, expanding into handbags, footwear and men’s, optimizing store network and growing e-commerce, among other areas.”
Jelena Sokolova, senior equity analyst at Morningstar, said Prada acquiring Versace “makes sense both financially and strategically. Prada’s profitability and cash position has been strengthened in recent years, helped by strong brand momentum. Most brands go through fashion cycles and ownership of several brands with very different aesthetics, as we can see with Versace’s maximalist style contrasting Prada and Miu Miu’s minimalist. By acquiring businesses of different character, brands can help protect themselves and smooth the cyclicality of performance. Prada has a strong track record of running luxury brands that Versace’s current owner Capri Holdings lacks in comparison.”
Brand, Retail Performance in 2024
Detailing the results, Prada Group retail sales amounted to 4.85 billion euros, up 16 percent compared with 4.2 billion euros in 2023, driven by like-for-like, full-price volumes. The fourth quarter also showed growth, as revenues at constant exchange rates rose 18 percent.
Retail sales of the Prada brand were up 4 percent at constant exchange rates in 2024 to 3.56 billion euros, sustained by all categories and by a consistent like-for-like growth trajectory supported by a well-balanced category mix.
Miu Miu continued its stellar growth, up 93 percent, surpassing the 1 billion euros mark, reaching 1.23 billion euros, lifted by all categories and regions.
Church’s was up 10 percent to 32 million euros.
“We are pleased to see that our strategy continued to deliver above-market performance, notwithstanding the challenging environment,” said Patrizio Bertelli, Prada Group chairman and executive director. “This success underscores the enduring relevance of our brands, which comes from an unwavering focus on product innovation, quality, craftsmanship and a unique ability to read contemporaneity. Drawing on multiyear investment initiatives across industrial capacity and know-how, our manufacturing platform and our people continue to be a differentiator in an ever-evolving sector that demands quality, agility and efficiency.
“Our group and its organization have strengthened over the past years and notwithstanding the uncertainties around us, we have entered 2025 with confidence continuing to work and invest for long-term sustainable growth,” Bertelli concluded.
Last year, operating profit was up 21 percent to 1.28 billion euros, with margin further expanding at 23.6 percent.
Gross margin increased 14 percent to 4.33 billion euros compared with 3.8 billion euros.
“We ended 2024 with very positive results across our brands, marking four consecutive years of double-digit, like-for-like growth, coupled with margin expansion and cash generation, resulting in a very sound balance sheet,” Guerra said.
He remarked on the “clear opportunity to continue to drive market share” at Prada, as he sees “a solid growth trend” for the brand in 2025, and that he is “never so worried about ups and downs,” while eyeing consolidation for Miu Miu. “For the year ahead, we retain our ambition to deliver solid, sustainable and above-market growth.”
As reported, Silvia Onofri joined Miu Miu as CEO last month, succeeding Benedetta Petruzzo.
Commenting on the impressive growth at Miu Miu, one analyst asked “what is the dream” for the brand in the next three or five years and how far can the brand grow? Guerra said, “We are not dreamers, so we are trying to achieve the most sustainable growth possible. How? First of all, it’s obvious that this kind of growth cannot continue for long. On the other hand, we’re trying constantly to balance our product working as hell on locals, working as hell on people who repeat and come back to the brand. This is what we are trying to do. Not necessarily we do it always right and not necessarily this kind of growth will last forever, and we know it.”
Speaking of narrowing the profitability gap between Prada and Miu Miu, Guerra said the latter “is making its way also because Prada is there. We have built an infrastructure, an industrial infrastructure, a consumer infrastructure, a services infrastructure, because Prada was there. So profitability at Miu Miu has substantially increased, and when you have this kind of growth, it’s more complicated to catch up with the costs.
“We remain with the same objective and mission. We want to grow in a sustainable manner. We will continue to foster, to invest, to nurture our brands, our creativity, our products, our store, our relationship with our consumers, the best we can. Then, obviously, if we are good in this and we have a scale effect, we will try to retain and increase our profitability. This is the logic and will not change.”
The group is planning to expand the Miu Miu store network in 2025.
Sales by Geography, Focus on U.S.
Retail sales in Asia-Pacific rose 11 percent to 1.6 billion euros, despite the challenging market conditions in the region. Business improved in the fourth quarter across all main areas.
“Last year, we saw a drop in Chinese consumer confidence, and I would say Chinese traffic in China,” Guerra said. “I wouldn’t consider [the fourth quarter] relevantly different from [third quarter] or [first quarter] in 2025, so the good news is that it’s not deteriorating. The bad news is that it’s not improving. What do we see today in terms of Chinese consumers? We see Chinese wishing to buy on events and we see Chinese wishing to buy during their touristic activities,” and he added “we will never give up” on responding to these wishes.
Sales in Europe rose 17 percent to 1.53 billion euros, supported by both domestic and tourist spending.
The Americas progressed positively throughout the year, up 8 percent to 830 million euros, entering double-digit territory in the second half.
Guerra said “we have seen America grow pretty fast between 2017 and 2022, probably more than doubling sales there. Then 2023 was a year of consolidation, and in 2024 where we have seen a lot of positive signs and some acceleration.”
He said the group is investing in the U.S. in the refurbishing of its stores and pointed to the acquisition of the building that houses the Prada flagship in New York on Fifth Avenue for $425 million. “I’m pretty positive about the short- and medium-term in United States, but this is a period of not consistent growth, so there can be quarters or moments or months where you have a bit of deceleration and then an acceleration. I’m not into a daily tracking and I am confident in North America. We saw an overall improvement of the American market during the past 15 months and the instability will not last.”
Japan was the best-performing region in 2024, growing 36 percent to 656 million euros, boosted by domestic and tourist spending. At constant exchange rate, sales rose 46 percent.
The Middle East was up 26 percent to 227 million euros.
On Other Categories and Pricing
Asked about other product categories, Guerra said he was pleased with the evolution and growth of fine jewelry and home collections. “I don’t think we need to add anything else.” They are still “small numbers” but “they are significant today to attract either our own consumers in different moments of their life or new consumers. This is why we’re doing it, and we have also enriched our creativity team in fine jewelry in recent times.”
Guerra also defended the group’s pricing strategy, as “nothing extreme” was done to increase prices, he contended. “What we have is an unbelievable opportunity upward. There are price ranges that we are not really touching today. We need the store infrastructure for those kind of price ranges, and we are ready for that.”
This does not mean an increase in prices, “but to have a better mix in what we sell. We have not changed our entry prices. So that is the most important part, and that has been the most relevant action that we have taken in the last years. The entry price is critical, then you can stretch upwards as much as you can.”
The board of directors has proposed an increase of dividend per share to 16.4 euro cents, which compares to 13.7 euro cents last year, resulting in a total dividend of 420 million euros.
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