Prada, Hermès Q1 results point to luxury’s great China divide

    First quarter results show China emerging as luxury’s make-or-break market.
    Actress Chun xia attends the Prada Spring/Summer 2022 Womenswear Fashion Show on September 24, 2021 in Shanghai, China. Photo: Getty Images
    Jing DailyAuthor
      Published   in News

    Hong Kong-listed Prada Group defied industry-wide luxury volatility in Q1 2024, posting spectacular retail sales growth of 18% YoY to $1.07 billion (€1.14 billion). This stellar performance was fueled by two powerful drivers – the continued blazing success of its Miu Miu brand and a robust revival in China.

    Joining Prada in outperforming was Hermès, with the Birkin bag maker reporting earlier today a 17% YoY surge in Q1 sales to €3.81 billion ($4.08 billion), beating analyst expectations. This extended its rapid pace of growth from late 2023 and underlined robust demand for ultra-luxury, even amid broader weakness in key market China.

    Hermès’ revenue in Asia-Pacific, excluding Japan, surged 14% YoY to $2 billion (€1.92 billion) in Q1. In Japan, revenue climbed 46% YoY, driven by travel.

    The results tally with a recent Hurun Research Institute luxury consumer survey that found China’s luxury market is displaying signs of resilience, reaching 1.66 trillion RMB ($237 billion) in 2023, up 3% from 2022. However, the country faces choppy economic headwinds including decelerating growth, a teetering real estate sector, an aging population and high youth unemployment.

    Miu Miu’s star turn#

    The undisputed star of Prada’s first quarter was its edgy younger-skewing Miu Miu label. Led by designer Miuccia Prada, Miu Miu’s retail sales skyrocketed an eye-popping 89% compared to Q1 2023. The brand has been on a scorching trajectory since 2022, captivating younger luxury consumers globally with provocative runway looks like ultra-micro miniskirts and buzzy sneaker collaborations.

    “Miu Miu’s strength validates our strategy of nurturing brand desirability through innovative products and consumer engagement,” said Prada Group CEO Andrea Guerra in a press release.

    The brand's success powered Prada Group past struggling competitors like Kering, whose Gucci sales declined 10% YoY in Q1. While the flagship Prada brand grew at a more modest 7% YoY, it demonstrated resilience through best-sellers like the Re-Nylon eco collection.

    China luxury rebound#

    A pivotal tailwind was the rebound in Greater China, with Asia-Pacific sales at Prada up 16% YoY as the key luxury battleground continued to recover from Covid-19 disruptions early last year. This expansion was all the more impressive as the growth rate is based on the quarter that China reopened.

    Hermès and Prada's results allay fears of a protracted Chinese luxury slowdown.

    Prada's sales in Europe rose 18% YoY buoyed by domestic and tourist demand, while they climbed 5% YoY in the Americas.

    Can the momentum continue?#

    As some luxury rivals struggle, the spotlight turns to whether Prada’s hot streak can roll deeper into 2024, propelled by the Miu Miu phenomenon and revitalized appetite in China for European luxury fashion.

    “We navigated a challenging climate to post solid results through investment agility and vision for sustainable long-term growth,” said Prada Group Chairman Patrizio Bertelli in the release.

    With China playing an ever larger role in luxury business results, Prada and Hermès’ first quarter numbers have raised the bar for the luxury sector in 2024.

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