Prada Posts Industry-Beating Growth Ahead of Versace Acquisition

Prada Group‘s first-quarter revenues rose 13 percent year-on-year to €1.34 billion ($1.52 billion), the Milan-based luxury fashion firm said Wednesday. Sales were flat at flagship brand Prada, while Miu Miu continued its surge with sales up 60 percent.

The group’s continued expansion stands in contrast to the wider industry, which has suffered from slowing economic growth, geopolitical instability and stubborn inflation, as well as customer fatigue. Sales at LVMH’s key fashion and leather goods unit fell 5 percent in the quarter, while Gucci-owner Kering reported a 14 percent drop.

“Growth has not been easy. The sector is now going flat or backwards since 18 months, and there are no real improvement signals in front of us,” Prada Group CEO Andrea Guerra said on a call with investors.

Guerra attributed Prada‘s outperformance, in part, to its commitment to innovation and efforts to “constantly carve society and culture.” The group’s longstanding ties to cinema, art and architecture have given the brand an edge on rivals at a time when celebrity activations and cultural partnerships play a crucial role in attracting attention, particularly online.

At the same time, the brand has managed to balance novelty with stability: While key competitors are going through creative transitions, Prada co-creative director (and controlling shareholder) Miuccia Prada has been in place since launching the brand’s ready-to-wear line in 1989. Guerra brushed off a question on whether it would be difficult to compete with the creative shakeups taking place at brands like Chanel, Gucci and Dior.

“The industry is in a reshuffle mood that is not close to being finished. I think it will take another 12 months. … This is a period where we can — and are, with great performance — win market share, because we have stability on one side, but we are full of creativity on the other side,” he said. “I think that stability nowadays is a very positive signal.”

Prada is aiming to establish a new vector of growth with its acquisition of Versace for €1.25 billion, announced last month. The deal, expected to close in the second half of the year, is a risky move — adding a loss-making brand to the group’s stable in a rocky market for fashion. But Prada is buying Versace at a price that could allow for big returns if the turnaround effort goes to plan.

“The current environment requires us to be agile and flexible; at the same time, we believe it is essential to continue to invest with a long-term mindset, preserving and developing craftsmanship and know-how, supporting our partners and strengthening our infrastructure,” Prada chairman Patrizio Bertelli said.

Price increases have helped to maintain Prada’s topline in recent months as the luxury industry is relying on a smaller group of hefty spenders and “aspirational” consumers remain under pressure.

With the threat of US tariffs looming, Prada said it wouldn’t pile on additional price increases beyond its planned pace of 2 to 4 percent in the first six months of the year. But the group has yet to decide its pricing strategy from June, when the impact of US trade policy will be clearer.

Overall, the US market is “unstable… Every week is a different story; every day it’s a different story,” Guerra said.