MILAN — Strong brand momentum at Prada and Miu Miu helped parent Prada Group report strong profitability and revenues in the primary half, but its management is eyeing further expansion in the long run, including through the addition of recent categories and expanding into beauty.

Group chief executive officer Andrea Guerra said during a conference call with analysts on Thursday that the corporate was “extremely comfortable” with its license with L’Oréal and that, along with fragrances, Prada will “very soon” extend the agreement with “one other milestone – beauty,” although he remained mum on details.

Prada’s license with L’Oréal got here into effect in January 2021, prior to which it was licensed to Puig. Prada did launch skincare in September 2020 under the previous license.

Guerra also pointed to the importance of retail excellence, and pointed to the addition of knickknack in stores, in addition to art de la table and residential collections.

The CEO, who joined the corporate in January, was upbeat throughout the decision, touting the group as amongst the very best at school.

Within the six months ended June 30, group net profit soared 62 percent to 305 million euros, compared with 188 million euros in the identical period last yr.

Revenues amounted to 2.23 billion euros, up 17 percent compared with 1.9 billion euros in the primary half of 2022. At constant exchange rates, sales rose 20 percent.

Retail sales increased 18 percent to 1.97 billion euros, driven by like-for-like full-price sales.

Wholesale revenues were up 8 percent to 194 million euros.

Throughout the call, Patrizio Bertelli, Prada Group chairman and executive director, attributed the performance to the brands’ “desirability” and “strong identity” in addition to to “careful and disciplined execution.”

He said he was “comfortable with the standard of the expansion,” with “a strong” Prada and “significant progression” at Miu Miu. He pointed to increased retail and industrial investments within the yr, an acceleration of store renovations, and “greater control.” Bertelli trumpeted the acquisition of a minority stake within the “excellent” cashmere producer Luigi Fedeli e Figlio with the Ermenegildo Zegna Group, as reported. In 2021, Zegna and Prada first joined forces to amass a majority stake in Filati Biagioli Modesto SpA, which focuses on the production of cashmere and other precious yarns.

The group’s “globally balanced distribution allows us to capture growth despite ever-evolving industry demand dynamics,” Bertelli continued. “We’ll remain vigilant and nimble, able to cope with different macroeconomic and demand scenarios which will materialize ahead. Our brands retain vast growth potential; our strategy is obvious, and our reinforced organization is well equipped to execute.”

In the primary half, operating profit rose 61 percent to 491 million euros compared with 305 million euros last yr, a margin of twenty-two percent on sales.

Gross profit gained 21 percent to 1.79 billion euros, compared with 1.47 billion euros.

The second quarter, said Guerra, “was one other positive quarter on top of a solid” first quarter, although he admitted the yr was “strange, remaining difficult month to month, and within the second half it could possibly be just a little awkward.”

Despite the strong performance, Carole Madjo at Barclays said the outcomes were somewhat mixed as sales got here in barely below expectations, because the second-quarter sales were 1 percent lower than consensus. But in her report she noted that the operating profit was however “much stronger,” an 8 percent beat versus the consensus. The margin of earnings before interest and taxes “reached a formidable 22 percent vs. consensus at 20.1 percent. We also note that the gross margin also improved significantly, reaching 80.3 percent (vs. consensus of 78.6 percent) notably helped by higher average price, positive channel mix and scale.”

Luca Solca at Bernstein said in his report that top-line growth was about 2 percent in need of consensus estimates, underscoring the “divergent progression” at Prada  and Miu Miu, while “geographic progression matches what now we have seen earlier, as LVMH and Richemont reported,” a slowdown within the Americas, while Japan and Asia Pacific lead. Operating profit against this is 7.5 percent higher than consensus, marking “a fabric improvement.”

Asked in regards to the dual listing expected in Milan after Hong Kong in 2011, Guerra said there was no update. Chief financial officer Andrea Bonini explained that “the technical issues” were accomplished. “We’ve done the work and tested the infrastructure, but this isn’t a priority even though it’s in our agenda. We are actually specializing in strategies and the organization of the group.”

Guerra underscored that the group’s “profitability further increased while we continued to consolidate our brands’ desirability with higher investments. We’re still originally of our strategic journey: We want to act with a long-term perspective, continuing to speculate behind our brands, maintaining maximum concentrate on retail execution and productivity. For the present yr, we retain our ambition to deliver solid, sustainable and above-market growth,” considering a tougher comp base within the third quarter and a few COVID-19 restrictions throughout the final quarter of last yr.

At constant exchange rates, in the primary half retail sales of the Prada brand grew 18 percent to 1.66 billion euros, with a more moderate but solid pace in comparison with the 21 percent increase of the primary quarter, on a high basis of comparison, excluding China.

Miu Miu reported 50 percent growth in retail sales within the semester to 285 million euros, with the second quarter up 57 percent compared with 42 percent in the primary quarter, lifted by the upper exposure to China and Asia. 

At group level, sales of leather goods were up 12 percent to 925 million euros; ready-to-wear rose 36 percent to 609 million euros, and footwear gained 20 percent to 374 million euros.

Guerra underscored that Prada logged in “one other great six months,” highlighting how the brand is a “careful interpreter of cultural and social movements,” and that there are “never shortcuts” with this attitude. He touted the “great reception” of the autumn collection over the past 10 days and the brand’s strength with the buy now, wear now offer.

“Miu Miu is basically reaching excellent brand momentum, with a pointy image, a readable identity and all products and categories are growing, leather goods are improving, and the expansion is balanced globally,” said Guerra. “We’re getting the team ready for future milestones and the evolution of Miu Miu.”

Guerra cautioned against comparing Prada, designed by each Miuccia Prada and Raf Simons, with Miu Miu, which is helmed only by the Italian designer, each with their “own life, destiny and growing pattern, and difference in geographic coverage.” Miu Miu, he said, is more exposed to Asia, which led him to point to the extra opportunities for Prada in China specifically.

“After years of rethinking , repositioning and re-engineering Miu Miu” and growing over the past 24 months, he believes there continues to be a considerable opportunity long-term.

Prada “stays on a sound trajectory and Miu Miu is reporting a remarkably strong performance, due to a strengthened identity and increasing visibility,” he said.

At current exchange rates, in the primary half retail sales in Asia Pacific gained 21 percent to 716 million euros, due to the acceleration in mainland China, Hong Kong and Macao, boosted by the low basis of comparison of 2022, when China was affected by the lockdowns in April and May, lifted from June. 

Japan was the best-performing region within the quarter, up 38 percent to 224 million euros, benefiting from the group’s recent investments within the retail network, a strengthened organization, solid domestic demand and increasing tourism flows. Guerra noted that Japan has all the time been “very strong for Prada historically, running by itself, there’s great love for the brand.” He clarified that Prada is “not registering a negative performance in China”; quite the opposite, “it’s having fun with a fast-growing pattern, and proves there’s further opportunity for the brand within the region.”

Group sales within the Middle East grew 15 percent to 92 million euros.

Retail revenues in Europe rose 20 percent to 582 million euros despite the very difficult comparatives, driven by healthy local demand and high levels of tourism.

Retail sales within the Americas amounted to 361 million euros, compared with 360 million euros in the identical period last yr, although the North American client cluster continued to grow throughout the semester, including within the second quarter, Guerra said, noting an improvement within the U.S. now.

Bonini said capital expenditures totaled 151 million euros in the primary half, compared with 97 million euros in the identical period last yr. Of this amount, 27 million euros were channeled into IT and 22 million euros in industrial investments, while the foremost chunk was spent on the shop network and communication and marketing.

The group continued to speculate in its retail network upgrade with around 70 renovation projects accomplished to raise customer experience and increase productivity

Guerra in truth noted that management was “obviously” eyeing operating profit growth, but touted the importance of investments and that he was more focused on “constant and healthy, incredible revenues growth.”

Asked about owned brand Church’s, Guerra said “now we have restarted from scratch and restructured it over the past two years, closing stores and accounts that weren’t useful and we now have a really clear positioning, with 25 to 30 stores and 140 to 150 wholesale accounts. We’ve been working really hard and by the tip of the yr, we could have more promising ideas and performance.”

Lorenzo Bertelli, marketing director and head of CSR, said that the group has turn out to be a signatory of ZDHC Zero Discharge of Hazardous Chemicals  by 2024, it has launched an ambitious water conservation program, and announced a recent partnership with IOC-UNESCO for the Sea Beyond project to expand training on ocean preservation. Prada Group is donating 1 percent of Prada Re-Nylon collection revenues.

As of June 30, the group’s net money position stood at 283 million euros.