Prada Aims for €8 Billion in Revenue Within Five Years

The future looks promising for the Prada Group, according to analysts interviewed by the Italian media outlet Milano Finanza. The Italian fashion house is planning to double its financial results over the next five years, a goal considered achievable by experts from UBS, Mediobanca Research, and Morgan Stanley. To achieve this, adjustments to its business strategy and certain improvements are recommended.

Under the leadership of Andrea Guerra (formerly of Luxottica and LVMH), the group owned by Miuccia Prada and Patrizio Bertelli is targeting €8 billion in revenue. In 2022, the group reported €4.2 billion in sales. UBS experts believe that to see these numbers rise, Prada should focus on its retail network. However, the number of stores could be reduced. Although the group currently has 612 boutiques and 26 franchises, a reduction in the number of stores, combined with an increase in their size and the exploration of new strategic locations, particularly in U.S. cities like Seattle or Austin, could prove beneficial. These cities attract affluent customers interested in European luxury despite inflation in the United States.

Prada should, therefore, produce more and sell its products in highly profitable stores. Currently, the profitability per square meter of Prada boutiques is estimated at €30,000, compared to €20,000 in 2019. This increase is substantial but still lower than that of competitors like Louis Vuitton, which reaches around €80,000 per square meter.

It's not just about the size of the stores. Specific training for salespeople in the respective regions will need to be considered. UBS then advises focusing on leather goods. Over the past nine months of 2023, the leather goods division represented 47% of the group's revenue, accounting for €1.4 billion in sales. Leather bags and accessories, more profitable than clothing, require less storage space, reducing costs.

Finally, analysts agree on the need to further enhance Miu Miu. The brand has risen to the top of the Lyst Index as the most loved worldwide and has recorded a 49% increase in revenue in the first nine months of the year, with a 17% increase in retail sales.

This multi-pronged strategy should be enough to double Prada's revenue in the medium term. For now, neither Andrea Guerra nor the Prada-Bertelli couple have commented on the possibility of making new acquisitions. The company intends to focus on its brands and develop them to their full potential.