It took something surprisingly small — something described as “tiny” and “extremely cropped” — to propel Prada into one of this year’s few luxury winners. In fact, it’s less than 10 inches long.
Miu Miu’s micro miniskirts, which debuted in 2021 and went on to become a hot topic and dominate TikTok and magazine covers, are emblematic of the brand’s high-profile years, and its parent company Prada is one of the few luxury brands in the world. This year, the company was able to grow.
“I think the ‘miracle’ at Prada is Miu Miu,” Bernstein senior analyst Luca Sorca told Business Insider.
Thanks to Miu Miu’s strong performance and a managed retail pipeline and store productivity, as well as Prada’s own series of smart business moves with an emphasis on experienced new hires, the company is now in the negative luxury Standing up to the trends. It’s selling well in Asia, stocks are rising, and investors are excited.
Net revenue for the first half of this year increased by 14% compared to the same period in 2023 and by 34% compared to 2022. At leading luxury brands LVMH and Kering, sales in the first half of the year were down 1% and 11%, respectively, compared to the previous year. year. The company’s stock has risen more than 30% since the beginning of the year, outpacing that of Hermès, the enduring leader in the luxury goods market. Along with Moncler, it is one of only two luxury goods stocks rated a buy by HSBC.
The 111-year-old family-run Milanese leather goods store has been transformed into a cutting-edge fashion superhouse and is now one of the greatest achievements in history.
fashionable sister
As all siblings know, sometimes the flashier, more fun younger sister can outshine even the most prepared eldest. Miu Miu is doing just that.
More experimental brands have become the fashion industry’s “it” girls. It ranks second in The Lyst Fashion Index, which measures the most popular fashion brands quarterly. Luxury resale platform The RealReal has seen a 47% increase in searches for Miu Miu this year. Micro minis, sneakers in collaboration with New Balance, and quilted wonder bags became must-have looks on the 2021 runways.
That’s reflected in impressive results, with retail sales up 50% in 2023 and 86% in the first half of this year. Last quarter, website traffic increased 110% year over year, Stifel’s Rogelio Fujimori reported in a July note. The brand’s revenue this year will likely reach $1 billion.
Miu Miu’s micro miniskirt has become a must-have item for the fashion set. Edward Berthelot/Getty Images
Part of it is the brand message.
“Miu Miu resonates with consumers because of its clever combination of product and communications marketing,” Solka said.
In a recent note, he emphasized that the brand’s events, such as tennis clubs, literary clubs, and film series, go beyond mere fashion to form a “cultural aesthetic.”
Miu Miu employs stars (Sidney Sweeney and Gigi Hadid have appeared in recent campaigns), which has energized its fans.
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The brand has also successfully entered the Asian market, one of the most difficult areas for luxury brands.
Again, some smart marketing helped. The brand has tapped K-pop icons as its ambassadors, dressing Chinese stars Lexi Liu, Qiao Jingmai and Wu Yanxu. It also increased spending on Chinese social media platform Little Red Book and held events in Tokyo, Taipei and Nanjing.
I mean, just kidding, you can’t get more trendy than Miu Miu at this point, and being trendy is good for business.
The business behind the boom
But Miu Miu’s attention-grabbing popularity is only part of the story. The brand accounted for 15% of Prada’s sales last year. HSBC analysts called the company’s growth a “(big) bonus.” The highlight was Prada (Business Insider did not respond to a request for comment for this story).
Behind Miu Miu’s Mary Jane shoes and arcade bags is the parent company’s success story.
The group’s eponymous line is growing, albeit at a slower, steadier pace. Prada’s retail sales increased by 3% in the first half of this year compared to last year and by 7% in 2023. Prada has been in the top 5 most popular brands on Lyst since 2022.
This didn’t happen by chance. In 2017, Prada embarked on a turnaround strategy after several years of losses and declining profitability. Even after more than 100 years in business, Prada had not yet entered the new millennium. Prada’s entire product line was not available through e-commerce and advertising was not digital.
“The tide really turned for them in 2015,” Morningstar senior analyst Elena Sokolova told Business Insider. “They performed worse than the industry. Sales were negative for years and profits plummeted.”
In response, Prada focused on retail, a channel where it could control prices and cut wholesale, which currently accounts for just 11% of sales. It sought to cut down on discounting, an issue that has plagued brands such as Burberry and Gucci and can lead to a decline in brand recognition.
At the company’s retail stores, new CEO Andrea Guerra, who took over from LVMH in 2023, has begun installing in-store installations to create one-on-one relationships between retailers, thereby increasing productivity. , a thorough study of how much revenue each square foot of retail space generates. Support sales associates and customers and infuse your stores with wearable items and collaborations. The company closed underperforming stores and renovated those that were doing well. It paid off, with retail productivity increasing by 32.5% between 2019 and 2023.
Prada has been investing in retail stores like this one in Hong Kong to maximize sales per square foot. SOPA Images/Getty Images
There were also many changes in management.
In 2020, the company hired Raf Simons, known as one of the biggest stars in the design world, as co-creative director, and the New York Times said, “The He shared the title with billionaire heiress Miuccia Prada, who dubbed the company “The World.” The most influential woman in fashion. ” Prada now has more time to show off her keen design sense at Miu Miu.
Over the next few years, the company added to its top ranks by hiring top talent from LVMH and Goldman Sachs.
And then there’s the fact that fashion is totally cyclical, and after a few years of not being very popular, Prada is making a comeback. Embracing the aesthetics of Prada’s heyday in the 1990s and Y2K, it’s popular with Gen Z and was the most searched brand among The RealReal’s audience.
Hit products helped propel the lucrative leather goods category to more than $2 billion in revenue last year. The it-bag of the early 2010s, Galleria, has been reimagined, complete with a Scarlett Johansson-led campaign. While re-releases of other handbags such as nylon have gained popularity, new types of wallets such as Buckle and Arke came under fire during last year’s earnings call.
That momentum has given the brand an edge in the luxury goods recession.
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“People prioritize which brands they want to spend money on, and when you have a limited budget, the first thing you do is cut out the brands that aren’t popular,” Sokolova says.
Will Prada’s good performance continue?
Just as trends come into fashion, so do fads. And Prada’s story, and Miu Miu’s rapid growth in particular, in some ways mimics Gucci’s story of hyped rise and fall under Alessandro Michele.
“It’s like being a victim of your own success,” Sokolova says.
Prada and Miu Miu are both susceptible to volatility, although for different reasons. Miu Miu is still a relatively small company, meaning its brand identity isn’t established enough to withstand the whims of consumers. CEO Guerra acknowledges that such tremendous growth can lead to challenges.
“There appears to be a glass ceiling,” Solka wrote in a recent memo. “Standing out leads to fatigue. After a while, consumers feel they’ve seen enough of these brands and move on to the next step.”
Prada, on the other hand, has more exposure in the cyclical ready-to-wear category, which accounts for 32% of sales, than other brands such as Gucci and YSL.
However, there are signs of continued growth, with the companies announcing that Miu Miu will add 10 to 15 stores next year and Prada will add 5 to 10 stores. This brand’s retail stores are not particularly popular in the United States. The company’s beauty business is still in its early stages. Last year, the company launched skincare and makeup products through a partnership with L’Oréal, which could bring in even more revenue.
With enough control over the distribution chain, the company can raise prices and limit overexposure through lower-end collaborations and expansion into cheaper categories.
Moreover, the slowdown has not yet occurred. Miu Miu’s website traffic and sales continued to increase between the first and second quarters, and the company insists that this is not a temporary phenomenon.
“This is the result of many years of commitment to our brand, products and people,” Guerra said of Miu Miu’s success during Miu Miu’s recent earnings call.
Meanwhile, Prada continues to maintain its brand value.
But Miuccia Prada herself knows the pressure is on.
“I was so nervous going into this show,” she told reporters backstage at the line’s fashion show earlier this month, The New York Times reported. “A lot more than usual.”
Correction: September 30, 2024 — An earlier version of this article misspelled Miuccia Prada’s name.
