Prada’s third-quarter retail sales beat Goldman Sachs expectations, but the revenue forecast upgrade does not lift this year’s profit forecast

Retail sales were flat. Why is that still a positive signal?

Prada Group’s third-quarter 2026 retail revenue was flat year on year at constant exchange rates, better than the 2% decline Goldman Sachs had expected and well ahead of LVMH’s Fashion & Leather Goods division and Gucci. The positive signal is its relative performance in a weak industry environment, on which Goldman Sachs bases its view that the group continues to gain market share.
The brands continue to diverge: Prada retail sales grew approximately 1% year on year, while Miu Miu fell approximately 3%, with the latter more affected by its greater exposure to China and the Middle East. Goldman Sachs expects Prada and Miu Miu to account for 62% and 29% of group sales, respectively, in 2026, so both the core brand’s resilience and Miu Miu’s trajectory directly affect group growth.

Goldman Sachs is more focused on whether the slowdown will stop worsening. Miu Miu’s sales previously expanded fivefold over a short period, and management believes it has now entered a phase of consolidation and normalization. Goldman Sachs expects that, at the current trend, its growth slowdown will not deepen further.
This valuation thesis requires two conditions to hold together: Prada must maintain positive growth and Miu Miu’s performance must stabilize. Management noted a positive reception to recent collections and is optimistic that both brands will continue to gain share in 2027.
Recent trading has improved, but the observation window is short: management said September and October were slightly better than July and August, helped by a longer holiday period in China; at the time, October covered only a small part of the fourth quarter.

In the third quarter, wholesale revenue excluding Versace rose 12% year on year, mainly reflecting a catch-up against a low base caused by fewer US shipments in the prior year; including Versace, it rose 25%. The two measures respectively reflect changes in the existing business and the contribution from consolidation.
Licensing revenue rose 24% year on year excluding Versace and 83% including it, with strong performance from Prada and Miu Miu beauty and eyewear. Goldman Sachs nevertheless expects retail to account for approximately 87% of group revenue in 2026, so the direction of group growth depends primarily on store sales.

Goldman Sachs raised its 2026 revenue forecast by 0.8% to 6.353 billion euros, but lowered its operating profit forecast by 1.3% to 1.201 billion euros, with the operating margin falling from 19.3% to 18.9%; its 2027 revenue forecast rose 1.9%, while operating profit rose only 0.4%. The improvement in sales translates into only limited profit gains.
Management said the current growth rate is broadly sufficient to stabilize margins while maintaining investment, but currency effects pose a headwind of approximately 1.5 percentage points, and Versace has a further dilutive impact of approximately 3.5 percentage points. Management is working to reverse Versace’s sales trajectory and narrow its operating loss in 2027, while continuing to invest in the brand, and expects currency pressure to ease next year.

Goldman Sachs maintained its buy rating and raised its 12-month target price from HK$52 to HK$53, approximately 37% above the HK$38.60 share price used in the report. It believes the current valuation of approximately 12 times 2027 expected earnings undervalues the group’s growth potential; the target price corresponds to approximately 16 times.
The target price combines a discounted cash flow valuation of HK$48.6 with a 85% weight and a potential merger-and-acquisition scenario valuation of HK$78 with a 15% weight. The two main brands remain the operational anchors; reinvestment required by intensifying competition, a greater-than-expected slowdown at Miu Miu, and disruption to Versace’s integration could all weaken the scope for profit and valuation recovery.