Prada Finally Catches China Luxury Wave in Return to Growth

(Bloomberg) -- Prada SpA returned to growth in the first six months of the year as a turnaround push began to bear fruit after three years of sliding sales.

Retail sales rose 9.7 percent at constant exchange rates, pushing revenue to 1.54 billion euros ($1.8 billion), the Milan-based maker of nylon rucksacks and block-heeled loafers said Wednesday. Analysts had expected 1.52 billion euros.

The Italian company is belatedly joining in on a China-led luxury rebound that lifted rivals like LVMH and Kering SA last year. Prada pushed prices skyward and struggled to follow up its hit Galleria handbag with new designs, while efforts to ramp up online communications and refresh the label’s shoe lineup were slow to take hold.

Prada said new sneakers performed well in the first half, while leather goods also rebounded. Sales were boosted by 36 new pop-up shops and partnerships with e-commerce providers such as Yoox Net-A-Porter Group SpA and Farfetch. The positive trend continued in July and Prada expects a boost in the second half from the relaunch of its Linea Rossa sportswear line, executives said on a call with analysts.

“We are constantly working to reshape the group to adapt to rapidly changing times,” Chairman Carlo Mazzi said.

A fervor for belt bags and cross-body sacks drove interest in Prada’s black nylon accessories this spring, while sister brand MiuMiu’s fashion shows made a splash on social media by putting trend-setting actresses like Elle Fanning and Chloe Sevigny on the runway.

The profit margin rose to 18 percent from 17 percent in the first six months -- still a far cry from the cash-cow status the company enjoyed at its peak, when it was only a notch behind the 30 percent-plus levels of Paris-based Hermes International.

To contact the reporter on this story: Robert Williams in Paris at rwilliams323@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman

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