This week, Prada and Miu Miu reported strong sales as LVMH slowed and Kering retreated sharply. In fashion’s so-called “quiet luxury” moment, consumers may care less about whether products have logos and more about what those logos stand for.
Call it the Prada Exception.
So far, the luxury slowdown has followed a pattern: Stalwarts of top-end, logo-free fashion like Hermès, Zegna and Brunello Cucinelli have surged ahead in recent months while brands dependent on fashion-driven, entry-level luxuries, from Burberry to Kering’s Gucci and Balenciaga, struggled.
This week’s sales were no different. Hermès outperformed expectations as enthusiasm for its iconic Kelly and Birkin bags continues to mount, with many customers willing to buy deeply into the brand across categories. Ultra-luxe, so-called “quiet luxury” propositions outperformed for Italian companies, too: Zegna’s first-quarter sales climbed by 11 percent while Brunello Cucinelli surged 18 percent, defying predictions for a slowdown across the market.
Meanwhile, Kering confirmed its forecast for a 10 percent year-on-year drop in first-quarter sales, and warned investors first-half profits would likely fall by 40 to 45 percent. “Gucci is not in the sweet spot for positioning — it’s seen as not enough high-end, not enough affordable,” chief financial officer Armelle Poulou said.
And yet Prada, which deploys its triangle logo heavily on products which tend to be priced closer to Gucci than Hermès, is also in the winner’s camp. This week, the brand said retail sales rose 7 percent. Trendy sister brand Miu Miu, which has also applied its bubbly logo across collections, fared even better with sales popping by 89 percent.
Prada’s outperformance challenges narratives about quiet luxury and top-end items dominating the current market. Where customers are putting their money may be less about logos or not, but about what those logos stand for.
Gucci, of course, is coping with brand-specific challenges as it seeks to move on from former designer Alessandro Michele’s maximalist vision and build a new story with Sabato de Sarno, a first-time creative director with a more subtle, sartorial aesthetic.
But Prada also outperformed Louis Vuitton-owner LVMH, which is used to leading the pack during luxury results season. Fashion and leather goods sales at LVMH grew by 2 percent on an organic basis in the first quarter, less than a third the rate of Prada’s.
In an era where seemingly every label is trying to be “cultural brand,” Prada is the original: For decades, Mrs. Prada and her husband, executive chairman Patrizio Bertelli, have worked to position their company at the intersection between commerce and the cutting edge of contemporary art, cinema, design and architecture. Initiatives include art foundations in Milan and Venice, facilities designed by Renzo Piano or Rem Koolhaas and campaigns featuring of-the-moment stars.
“They’ve been very good at telling the world that art is fashion, and fashion is art,” Citi analyst Thomas Chauvet said.
Prada’s longstanding involvement in those arenas, as well as the unfussy, sporty quality of many carry-over items means the brand’s logo is less of a badge of ostentatious wealth than one of cultural curiosity and style. “While both Miuccia and [co-creative director] Raf [Simons] love to weave social and cultural commentary into their collections, they are also product-first designers who create clothes that people really love to wear,” Mytheresa’s chief commercial and sustainability officer Richard Johnson said.
As such, Prada has continued to do big business in entry-level, logoed luxuries like nylon card holders and rucksacks even as demand from aspirational shoppers broadly cools off in the face of slowing growth in real wages and industry-wide price hikes. For now, being a part of Prada’s universe still feels worth it — a dynamic that’s particularly true at the moment for the group’s Miu Miu label, where viral runway shows featuring a twisted take on youthful street style have spawned a global fashion sisterhood.
Aspirational clients are just one piece of the puzzle. While Prada’s colourful, design-first aesthetic may have little overlap with the conservative look of luxury houses like Hermès or Brunello Cucinelli, the businesses have more in common than meets the eye. Prada’s ready-to-wear collections (co-designed by Mrs. Prada and Raf Simons) have attracted a loyal following of wealthy shoppers over the years, who continue to buy heavily into the brand. Hefty price hikes in recent seasons and a push by stores to get fashion-driven clients to place orders in advance (rather than keeping too many complex seasonal pieces in stock) has limited the margin risk from having a high exposure to ready-to-wear.
A healthy dynamic in luxury ready-to-wear seems like a key theme this quarter: coatmaker Moncler Group also reported strong growth. On the other end of the spectrum, LVMH’s sluggishness could be largely attributed to its dependence on pricey handbags (not all of which have the customer clout to command record prices).
“The big conglomerates could certainly be feeling some fatigue in handbags. The category might be suffering due to a lack of affordability … And it’s a harder category to differentiate yourself in than ready-to-wear or shoes,” Chauvet said.
To be sure, one quarter’s sales won’t make outperforming luxury’s biggest groups — which have an edge on competitors for everything from real estate to marketing, logistics and talent acquisition — a structural trend for Prada Group. The Miu Miu craze is sure to slow eventually, and Prada is not immune to downturns either. The company took 10 years to get back above its 2013 peak after a China-fuelled surge in revenues fizzled.
But for now, fashion’s most “cultural” brand is flying high.
Via The Business of Fashion