According to a research report released by Morgan Stanley, based on weakening luxury consumption data from China and the United States, the bank has lowered its third-quarter forecasts for PRADA (01913), stating that brands under the Prada group will find it difficult to remain unaffected; the target price for PRADA has been reduced from HK$42 to HK$40, while the "market perform" rating is maintained.

The bank now forecasts that Prada brand retail sales will be flat at constant exchange rates, while Miu Miu will decline by 3%, with the group's overall third-quarter sales falling 0.5% year-on-year. The bank has also lowered its fourth-quarter forecasts, as there is no reason to expect a significant rebound in demand, and has cut estimates for later years, reflecting a more cautious view on the medium-term growth of the luxury goods industry.

The bank notes that Miu Miu, as a key variable for investing in PRADA, is what investors are watching for evidence of a transition from high-speed growth to sustained growth. However, the brand is now facing a challenging environment, given its higher-than-average exposure to Chinese customers, significantly lower exposure to American customers, relatively high exposure to Middle Eastern customers, and the challenge of a high base of comparison.

The bank expects Miu Miu's third-quarter retail sales to decline 3% at constant exchange rates, implying a double-digit drop in like-for-like (LFL) sales, which will intensify market concerns that Miu Miu may experience a substantial sales correction after its rapid growth phase.