Prada Group(HKG:1913): Luxury on a Budget
The overall luxury apparel space has been in a slump for some time which has created an opportunity for some names in the space. Prada Group(HKG:1913) is one such name down over 40% from 2025 peaks. The company has actually performed well despite the industry backdrop with revenue up 9% in 2025. The Prada Group was mostly a 2 brand company till the recent acquisition of Versace from Capri Group in April 2025. Versace will become a large slice of the company’s revenue pie projected to be 13% of total revenue. More recently, growth at the flagship Prada brand has slowed, while Miu Miu—founded under the Prada family umbrella—has become the primary growth engine. The addition of Versace introduces another potential driver of long-term expansion. At current levels, the stock trades at an attractive valuation of roughly 2x EV/Sales, which, assuming a 20% EBIT margin, implies approximately 10x EV/EBIT. For a business of this caliber—consistently ranked among the hottest luxury brands, with high insider ownership, strong stewardship from management, and a newly acquired brand with significant upside—this looks like a compelling opportunity.
Industry Backdrop
The luxury industry experienced a contraction in 2025 which Bain projected to be a 2%-5% decline this being the 2nd straight year. Which is a far cry from when they were projecting 6-8% growth in my article on Capri back in 2022. The Gucci brand is one of the poster childs of the industry decline with a massive 23% decline from 2023 to 2024 and again a 22% decline from 2024 to 2025. Berenberg, a German investment firm, points out that this is only the 3rd time in three decades where the luxury space has declined 2 years in a row. This to me points more to an opportunity than something to be concerned about.
Even though the luxury sector is facing some short-term ups and downs, its long-term outlook still looks strong. Over the next five years millions of new consumers—over half from Generation Z and Generation Alpha—are expected to enter the market. Growth should also be supported by rising global incomes, wealth transfers between generations(baby boomers), and a general rise in high-net-worth individuals, all of which will help expand the luxury customer base. This will get the industry back on track to over 5% growth.
The Company
The Prada brand begins in 1913 in Milian selling mostly bags. Its luxury roots begin quite early when the company became the official supplier to the Italian royal family. Fast forward to today the company is in all facets of the luxury space. The company is consistently ranked as one of the hottest brands according to the Lyst index which tries to gauge which brands are the most popular based on social media and shopping behavior
This could be why the Prada group itself has been immune to this industry slowdown so far with revenue up in 2025 by 5%.
Source: Prada 2025 Presentation
If we look at revenue at a brand level we do see a slowdown in the main Prada brand but the group’s other big brand Miu Miu has been keeping up the growth. Miu Miu had 35% growth in 2025 while Prada had -1% growth.
Source: Prada 2025 Presentation
The company’s newest brand Versace which became part of the group in Dec of 2025. The company is one of the brands that did get affected by the slowdown with revenue declining. From 2023 revenue went from 1.1B to 821M.
Source: Capri 2025 10-K
However, the decline does seem to be slowing. I don’t have exact full-year 2025 numbers because of the acquisition timing, but by my estimate, Versace generated around $800 million in revenue, suggesting that the brand’s downward trend has at least begun to stabilize.
Before Versace was fully acquired by Prada, Capri had brought in a new creative lead, Dario Vitale, who generated strong early buzz with his debut show. His first collection was well received and helped renew interest in the brand, but he was later let go as Prada Group moved forward with its own vision for Versace.
The brand already appears to be shifting stylistically—moving away from some of the louder, more flamboyant elements that traditionally defined Versace and toward something more refined and understated, which feels more in line with Prada’s overall approach. Whether that ends up being the right move remains to be seen, but it does show that Prada is serious about repositioning the brand rather than simply maintaining the status quo.
In the meantime, Prada was able to acquire one of the most recognizable names in luxury at a point of weakness, giving it the opportunity to rebuild the brand under stronger ownership. If management can successfully stabilize operations and restore growth, Versace could become a meaningful long-term value driver for the group rather than just an added revenue contribution.
Size
Prada’s main brand has been stalling at least recently. With current revenue of 3.4B I wanted to try to visualize how big it can get. LVMH itself makes 38B in the luxury fashion space. However they don’t break down each brand. Gucci, the biggest brand I could find, had revenue which peaked at 10.5B in 2022. Since then things haven’t been great for the brand but that gives us a picture that the main Prada brand still has potential to grow not just along industry lines.
Ownership
The Prada group is one of the few companies in the luxury space to maintain family ownership with the original Family. Miuccia Prada, the youngest granddaughter of the Founder, is a 80% owner of the group along with her husband. Miuccia who was also a successful designer for the company till she stepped down in 2020 is 77. Succession has already been planned with Miuccia Son Lorenzo set to take over in the coming years. He has worked as head of marketing for the past 6 years so he should have a good grasp on the company when he takes over. High insider ownership is a key feature I like to see in companies I invest in as it aligns management with shareholders and Prada definitely has that for years to come. The negative could be the fact that only 20% of the company trades freely so the family may come and buy out shareholders if the value gets enticing. Which would be bad for my investment.
Valuation
Why I’ve become particularly attracted to Prada is the valuation. After a stock decline of nearly 50% from Feb 2025 the company is now trading around 2 times EV/Sales. Looking at history from 2017 the stock has fluctuated from a high of 6 times EV to Sales to a low of 2.3. Meaning the current multiple of 2.2 times is the lowest at least as far as I’ve gone back.
Source: Author created chart, data from company annual reports
As we address this is most likely due to the industry tailwinds which hasn’t affected Prada’s business specifically yet. I am confident that this will blow over and rich people will want to spend their money again. Another concern in the short term is Prada Group’s profitability as Prada digests Versace. Versace as of Capri’s latest 10-K for 2025 lost 54 Million USD from operations. So it may take time to get Versace back to profitability. Which just 2 years ago was at $150 Million USD.
The Prada Group since 2019 has managed to maintain a 20% cash flow EBIT margin with a dip in 2020 due to covid to 12%. As of fiscal year 2024 they achieved a 25% EBIT Margin. So there could be additional concerns that profitability is peaking. However even back in 2017/2018 when cash flow EBIT margin was 12% the company was still trading at over 2.5 times EV/Sales so I’m not too worried about that.
Roadmap
How I’m seeing this play out is as follows.
- Next one to two years the industry and maybe The Prada group continues to contract
- Prada profitability decreases due to digestion of the Versace Acquisition in the short term
- In 2028 baring any world craziness the luxury fashion space gets back to growth while The Prada Groups profitability begins to stabilize and the groups multiple begins to rerate.
Reasons this Fails
Luxury Fashion Consumer Never Comes Back
There’s definitely a growing perception that quality in luxury fashion has declined. A number of viral videos showing damage after light wear for quite expensive garments. Couple that with the large price spikes since COVID and you can see why the industry has been in turmoil recently. Not to mention the general economic uneasiness though that can be debated. My default opinion is still that nothing really changes. Quality in most clothing has steadily degraded over time and the new global wealthy and old will still need a status symbol to distinguish themselves from the masses as has been for a long time.
From a quality standpoint, Prada Group may actually be in a stronger position than many peers. The company owns 25 of its own manufacturing facilities and states that 93% of its suppliers are located in the EU, which suggests tighter control over production and quality compared to competitors that outsource more aggressively. While Prada doesn’t disclose exactly how much of its product mix is manufactured in-house versus outsourced, it likely has better oversight than most of the industry.
However if the consumer isn’t coming back by 2028. Then I may need to sell.
Conclusion
Overall, Prada Group looks like a really interesting opportunity here. The luxury space has been weak for a while, but the company itself has still been performing well and growing revenue despite the tough backdrop. Miu Miu has stepped up as a major growth driver, and now with the addition of Versace, there is another strong brand that can help drive future growth. At around 2x EV/Sales and roughly 10x EV/EBIT, the valuation looks attractive for a business with this level of brand strength, strong insider ownership, and management that seems focused on long-term value creation. For a company that continues to rank as one of the hottest names in luxury, the current pullback looks like a solid opportunity.
Top 4 KPI’s
For all my investments I track 4 KPI’s to better keep track of my thesis and to make better decsions when adding or selling out of a stock
For the Prada Group I have chosen the following
1. Revenue by Brand
2. Cash Flow EBIT Margin
3. Brand sentiment based on the Lyst Index
4. Gross Margin
