Morningstar | Prada Sales Growth Largely in Line With Expectations But Recovery Now Priced In. FVE Maintained
We are maintaining our HKD 29 fair value estimate and narrow moat rating for Prada after the company reported first-half 2018 sales broadly in line with our expectations (constant currency growth of 9% versus 8.5% expected). Operating margin showed marked improvement to 10.4% from 9.2% level last year. Currency headwinds and increased marketing expenditures should limit the operating leverage for Prada this year, despite growing off largely the same store base (we expect operating margin slightly above 12% in 2018).Prada and Miu Miu businesses both saw sales recovery in the first half of the year with 10% and 8% constant currency growth, respectively. While still early in the recovery and helped by supportive demand backdrop, we believe these developments support our narrow moat rating for the stock and our thesis that despite recent cyclical and operational hardships, the brand is not beyond repair. Nonetheless, we believe that the recovery is currently priced in and would wait for more attractive levels to invest. Our fair value estimate implies 6% average annual growth and gradual return to above 20% margins over the next 10 years.
All regions and product categories showed growth in the first half of the year with ready to wear (up 20%) and Greater China region (up 17%) leading gains. The Chinese consumer cluster globally grew by midteens in the first half of the year. Recently launched product ranges such as Prada nylon collections performed well and pop-up store openings contributed positively to increasing customer traffic. The launch of its athleisure line Linea Rossa in the second half of the year should further support positive sales development.
PRADA is engaged the luxury goods sector where it operates with the Prada, Miu Miu, Church's and Car Shoe brands in the design, production and distribution of luxury handbags, leather goods, footwear, apparel and accessories. Co. also operates, under licensing agreements, in the eyewear, fragrances and mobile telephone sectors. Co.'s products are sold in 70 countries worldwide through a network that included 540 Directly Operated Stores (DOS), and a select network of luxury department stores, independent retailers and franchise stores.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.