How will Prada’s AOVs fare in 2023?
US sales were strong in H1 2022 and better than expected in H2 2022, the former SVP at Prada SpA said, adding that the US is poised to remain the strongest-performing region in 2023. Continued growth in the high-margin leather goods sector is also encouraging and will support the brand this year. However, volatility in Europe is expected to create difficult conditions in the region, with a potential slowdown in sales.
In China, the expert said COVID-19 challenges have taken their toll and they also commented that luxury brands may need to reconsider their strategic approach in the region, especially with some local brands gaining momentum. Meanwhile, the lack of Chinese tourists in cities including Milan, London and Paris has had a significant impact on sales. However, by strengthening CRM tools, hosting retail events and increasing e-commerce efforts, Prada has successfully offset some pandemic-driven losses.
However, the interest rate environment and cost of living crisis are expected to create further challenges in 2023. “I would expect the average order value to potentially slightly decrease, and that can be counteracted with price increases, but it’s a very fine line,” the expert said.
We also heard Prada may need to exercise caution with the footwear category, where having the right product mix is crucial. The expert highlighted a “high penetration of sneaker sales”, noting that this market is “booming” but saturated at all price points.
Against the backdrop of an uncertain macroeconomic environment, increasing sales of leather goods could help the company retain its 77% gross margin. The expert also cited inefficiencies in CAPEX and manufacturing costs that will need to be “continuously controlled”. On the 2-3-year sales growth outlook, Prada may still achieve 5-10% – albeit slower in Europe – driven by product development and strategic price positioning, according to the Interview.
Click here to access all the human insights in Third Bridge Forum’s Prada – 2023 Growth Outlook Interview, and here to learn about how Forum helps public equity investors make faster and smarter investment decisions.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
For any enquiries, please contact email@example.com