3 Comments
User's avatar
Vinny Nguyen's avatar

Hi what's your source on the in house manufacturing proportion? Per capital market day 2021 it's already at 40%, so very likely 60% already by now.

Also miu miu € per sqm is €30k according to various sell side note interviewing mgmt. which is actually higher than prada. Net i think normalised ebit margin is 30%, that should translate to €30bn market cap at least imo.

Expand full comment
Michael Fritzell's avatar

I think I got that number from the sell-side. I doubt it's already 60% as management quoted a 10% number as late as 2023. Prada is known to have a low degree of vertical integration, though higher for the more expensive Prada-branded bags.

Wow, that's really impressive. My number on store productivity might be outdated then. Miu Miu has been growing rapidly so that explains it. Yes EUR 30 billion sounds possible given where peers are trading.

Expand full comment
Vinny Nguyen's avatar

Thanks Michael. I combed through the transcripts again and didn't see a figure mentioned late 2023. That said i did note Massimo Vian the then industrial director mentioned 10% for clothing, and 40%+ for bags shoes in a press. That said, in 2021 management themselves , and Massimo himself presented in the capital market deck (page 75) 40% total internal assembly for bags and shoes, but almost 100% for sample production, leather good cutting, quality control, warehouse mgmt.

Granted that it's subjective to quote a single figure, but i think that given leather and shoes are ~65% of rev, and ready to wear is ~35%, if i take the capital market day deck as single source of truth and assume the % has gone up since then (2021 capital market day, so 4 year on), and assume 50% for shoes/leather, and 15% for ready to wear, then weighted average figure of internal assembly would be ~40% rounded. (65% x 50% + 35% x 15%)

Combing through some of expert transcripts it's widely known in the industry that Prada industrial capability is a differentiated point.

That is what they spent their money on since effecting the turn around since 2014, and it's a key KPI.

The implication of this is $ that would have otherwise gone to the tier 3 brands like brby versace etc now gone to prada and miumiu, and if gucci brand issue persists there is a non insignificant chance prada+ miumiu may all together displace gucci (€7-8bn rev now) , street forecast of prada and miumiu is that much in 3-5 year time.

That means prada probably is the one two brands that may be able to step in the true lux circle (chanel, hermes, dior, lv) 5 years out .

Expand full comment