【Top 100 Insights】Luxury goods are cooling off, can PRADA still outperform its peers?

As is well known, due to a sharp drop in demand, the luxury goods industry ushered in a chilling "winter" in 2024, which was also reflected in the performance of luxury goods giants.

However, despite the industry cooling down, some brands still performed well.

Industry faces "winter", but these brands stand out

On July 23, French luxury goods giant LVMH (LVMUY.US) announced its mid-year performance for 2024. The data shows that in the first half of the year, LVMH Group's sales revenue decreased by 1% year-on-year to 41.7 billion euros, achieving 2% organic growth; Net profit attributable to the parent company decreased by 14% year-on-year to 7.3 billion euros.

By region (on an organic basis), sales revenue in the Japanese market increased by 44% year-on-year; Asia (excluding Japan) saw a 10% year-on-year decrease; the U.S. and Europe saw increases of 2% and 3% respectively.

Another luxury goods giant, the parent company of Gucci, Kering Group (PPRUY.US), also reported a decrease in revenue of 11% to 9 billion euros in the first half of the year, with net profit attributable to the parent company plummeting by 51% to 0.9 billion euros.

Similarly, by regional market segmentation, the sales in the Asia-Pacific region (excluding Japan) in the first half of the year were 2.9 billion euros, a 22% year-on-year decline.

It is worth noting that several luxury goods giants that have announced mid-year performance mentioned the weak demand for high-end consumption in China, which is consistent with the performance in the above regions.

While facing declining performance, luxury goods giants like LVMH also could not escape the fate of falling stock prices.

However, amidst the overall industry downturn, there are still some brands that have achieved significantly better performance than their peers.

For example, in the first half of the year, Hermès' revenue was 7.5 billion euros, with a 15% year-on-year growth at fixed exchange rates (12% growth at variable exchange rates); achieving a net profit attributable to the parent company of nearly 2.4 billion euros, also showing growth.

By region , revenue in Asia excluding Japan increased by 10% year-on-year; thanks to local customer loyalty, revenue in Japan increased by 22% year-on-year; revenue in the Americas increased by 13% year-on-year; revenue in Europe excluding France increased by 18% year-on-year; revenue in France increased by 15% year-on-year.

In addition, in the first half of the year, PRADA achieved revenue of 2.55 billion euros, a 14% year-on-year growth; achieving a net profit attributable to the parent company of nearly 0.4 billion euros, a 26% year-on-year growth, showing strong performance.

By region, PRADA's retail sales in the Asia-Pacific region in the first half of the year increased by 12% year-on-year; retail sales in Europe increased by 18% year-on-year; Retail sales in the Americas increased by 7% year-on-year in the first half of the year, while retail sales in Japan increased by 55% in the first half of the year.

It is reported that Hermès can maintain growth mainly due to good supply and demand relationships, while Prada's outstanding performance in the first half of the year is mainly driven by its high-growth brand Miu Miu. Data shows that Miu Miu's net retail sales increased by 92.7% year-on-year, demonstrating excellent performance in all categories and regions.

Hermès had a strong performance in the third quarter, can Prada continue its momentum?

It is worth mentioning that some luxury brands have already released the latest third-quarter performance-related information.

LVMH's third-quarter financial report shows that all major divisions' performance fell below expectations, with quarterly revenue declining by 3% year-on-year, marking the first decline since the outbreak of the pandemic, and core division sales experiencing the "first decline in four years"; Gucci, a luxury brand under Kering Group, saw a 25% year-on-year decline in sales in the third quarter, and Kering Group expects the collective profit for 2024 to decline by over 45% year-on-year.

However, on October 24th, Hermès announced that revenue for the third quarter was €3.7 billion, with sales growing by 11% at fixed exchange rates, slightly higher than expected.

Hermès' latest performance announcement is a breath of fresh air for the luxury goods industry, giving a slight boost to investors' confidence in the luxury goods industry.

Regarding Prada, CICC recently released a research report stating that it is expected that Prada's retail revenue will grow by 14% year-on-year at constant exchange rates (CER) in the third quarter of 2024, with a year-on-year growth of 13% to €1.133 billion based on financial report criteria, impacted by a 1 percentage point unfavorable exchange rate. The slowdown in year-on-year retail revenue growth compared to the second quarter of 2024 is mainly due to the slowdown in growth in the Asian region, as the Greater China region is affected by weakened consumer confidence, and the Japanese region experiences a slowdown in sales growth due to the appreciation of the yen leading to decreased product attractiveness.

However, CICC analysts believe that Prada is in a favorable position within the luxury goods industry and is expected to outperform its peers in 2024.

It is understood that Prada will announce quarterly performance updates on October 30th, which is worth tracking.

Conclusion

As one of the leaders in the luxury goods industry, Prada has been selected multiple times in the "Hong Kong Top 100" list and has achieved impressive rankings.

According to the Hong Kong Top 100 official website, the 2024 Hong Kong listed company development summit forum and the 11th "Hong Kong Top 100" awards ceremony, organized by the Hong Kong Top 100 Research Center, co-organized by Finance News, Futu Securities, and supported by media organizations such as Hong Kong Ta Kung Wen Wei Media Financial Public Relations Group, will be held grandly on the afternoon of November 11, 2024, at the Hong Kong Convention and Exhibition Center This event will focus on how to further consolidate Hong Kong's position as a global wealth management hub and capital market fundraising center, as well as in-depth discussions on enriching the financial technology ecosystem in the new era.

Against the backdrop of a cooling luxury goods industry, can PRADA once again be selected for the latest "Hong Kong Top 100" list? Let's wait and see!