FY 2016 Results Presentation
Milan, April 12th 2017

AgendaPresentation
14:00 – 14:30
Patrizio Bertelli – CEO• Overview

Alessandra Cozzani – CFO• FY 2016 Financial Review
Patrizio Bertelli – CEO• Commercial Update• Outlook
Q&A Session
14:30 – 15:00

FY 2016 Results Presentation – April 12th 20171

FY 2016
Pathway to sustainable growth
Patrizio Bertelli
CEOFY 2016 Results Presentation – April 12th 20172

FY 2016
Pathway to sustainable growth
2016 has been a challenging year but our action plan delivered satisfactory economic results
Built new digital team fully dedicated to rolling out e-commerce platform on a global scale in order to develop
a truly omnichannel shopping experience
New products launched leveraging Prada’s unique heritage and creativity, filling all strategic price points
Successfull implementation of rationalization programme creating a leaner and more efficient structure
Effective management of Net Working Capital and particularly inventory
Positive Net Financial Position after paying dividends thanks to strong cash flow and all growth fully self
financedThanks to our actions, we have seen early signsof improving trends in H2 and in particular in Q4
FY 2016 Results Presentation – April 12th 201732016 Financial Review
Alessandra Cozzani
CFOFY 2016 Results Presentation – April 12th 20174

FY 2016: at a glance
Successful cost reduction program stabilising margins
Condendsed P&L

€m

FY 16

FY 15% change

Net Revenues

3,184

3,548

-10%

Gross Margin

71.9%

72.4%

EBITDA

653

803

EBITDA Margin

20.5%

22.6%

EBIT

431

503

EBIT Margin

13.5%

14.2%

Net Income

278

331

-19%

-14%-16%• Industrial efficiencies supporting high gross margin• Satisfactory level of EBIT and EBITDA due to the positive impact of cost reduction program

FY 2016 Results Presentation – April 12th 2017

5FY 2016: at a glance
Strong cash flow self-financing
Condensed Balance Sheet and Cash Flow€m

31 Jan 17

31 Jan 16

Non current assets

2,600

2,587

Net operating working capital

556

665

Other current assets / (liabilities), net

51

26

Other non current assets / (liabilities), net

(126)

(70)

Net invested capital

3,081

3,208

Consolidated shareholders’ equity

3,104

3,097

Net financial position (surplus)/deficit

(23)

111

Total

3,0813,208

Operating cash flow

632

368

Capital expenditure251337• Efficient working capital management supporting strong operating cash flow
• Capex fully self-financed• Positive cash flow after dividend payments enabling debt pay down
FY 2016 Results Presentation – April 12th 2017

6

Net sales by channel
Improving trends across the year€m

FY 16% changesame FX

H1 16% changesame FX

H2 16% changesame FX

Retail

2,635

-13%

1,277

-16%

1,358-10%

Wholesale

504

+15%

252

+3%

252+29%Total

3,139-10%

1,529-13%1,610-6%

FY 16 split:

Retail16%• Sequential improvement in H2 and particularly in thelast months of the year

Wholesale84%

Retail• Excellent results from e-tailer partnerships (launchon Net-a-porter.com and MyTheresa.com in Julyand Mrporter.com in September)

Wholesale

FY 2016 Results Presentation – April 12th 2017

7

Net sales by geography
Most regions saw improved trends in H2
FY 16% changesame FX

H1 16% changesame FX

H2 16% changesame FX

600-8%

591

218-15%240-3%-9%Europe

1,190

Americas459-5%-12%

Far East

993-12%461-21%532-3%

622-12%289-22%333-2%

Japan

389-13%

192-9%

197-16%

Middle East103-10%56-8%

48-13%

Others

5-15%

2-20%

2-8%

Total

3,139-10%

1,529-13%

1,610-6%

Greater China

Strong rebound in Mainland China from Q3, delivering double digit growth in Q4; trend in HK and Macau improved,
particularly in Q4
Signs of recovery in Europe• Growth in UK (double-digit in H2); Russia outperformed across the year
• Early signs of recovery in France
Americas impacted by falling touristic flow in US• Positive performance in Canada in H2• Latina America outperformed led by Mexico and Brazil
Declining sales in Japan as stronger yen discouraged Chinese tourists
FY 2016 Results Presentation – April 12th 2017

8

Net sales by product
Enrichment of offer delivering better results€m

FY 16% changesame FX

H1 16% changesame FX

H2 16% changesame FX

Leather Goods

1,804

-14%

894

-18%

910

-9%

Footwear679-4%

344-4%

335-4%

Ready to Wear

600-1%

262-7%

337+5%Others

56-8%

29-12%

28-2%

Total

3,139-10%

1,529-13%

1,610-6%

FY 16 split:

2%

Leather goods – contraction mitigated in H219%•New launches broadened range of price options•Excellent market response of latest collections

Footwear – slight decline
•

57%

22%

Outperformance of Miu Miu, delivering growth in H2

Ready to wear – resuming growth in H2•
Leather goods

FootwearRTW

FY 2016 Results Presentation – April 12th 2017

Very good reception of FW collections for both Prada and Miu Miu

Others9Net sales by brandSales performance improved for all brands€m

FY 16% changesame FX

H1 16% changesame FX

H2 16% changesame FX

Prada

2,528-10%

1,234-14%

1,295-7%

Miu Miu

515-8%

249-14%266-2%

Church’s

80+6%

40+10%

41+2%

Other

16-6%

7-10%

9-1%

Total

3,139-10%

1,529-13%

1,610-6%

FY 16 split:

3%

Prada

16%

•

Sales contraction mitigated in H2; resilience in Q4

Miu Miu•

81%

Sales improved in H2; turned positive in Q4

Church’s•
Prada

Miu Miu

Church’s

Solid growth across the year

OtherFY 2016 Results Presentation – April 12th 201710Operating performance
Cost reduction stabilizing margins

EBIT (€m)
EBIT margin:

16.1%

12.2%

13.8%

13.3%

210

214

217

H2 2015

H1 2016

H2 2016293

H1 2015• Excellent progress on costs, stabilising operating margins half-on-half

FY 2016 Results Presentation – April 12th 201711

Cost optimization
Excellent results of cost control program
Year-on-year change:• €129m reduction in operating costs• €78m reduction in D&A

Operating expenses -10% yoy(€m)

Labour costs reduction• Freezing turnover of non-operationallycritical staff

2,065
221
134
192

Systematic rent negotiations

1,858
177
125
173

Internalize of activities resulting in lessconsultancy and general services
1,517

1,383

Continuosly trimming G&A and indirect costs
Advertising• Increasing investments in digital communication

FY2015
Selling

FY 2016 Results Presentation – April 12th 2017

Advertising&Promotion

FY2016
Product Development

G&A

12Operating cash flow
Strong operating cash flow supported by efficient inventory management

Net inventories (€m)

Operating cash flow (€m)

As % of sales:
21%

20%

19%

17%

779
693
625
527
Net working capitalabsorbing cash

646365
305

274

591

526
42326720963
H1 14

H2 14

H1 15

H2 15

H1 16

H2 16

133

10299104

Jul 31, 2015

Jan 31, 2016

Jul 31, 2016

Jan 31, 2017

Raw Materials & Work in Progress

FY 2016 Results Presentation – April 12th 2017

Finished Products

13CapexCapex stabilized as focus shift from store openings to refurbishments
Capex (€m)
As % of sales:

9%8%

337

162

251
100

175

151

Corporate&Industrial
Retail2015

2016

•

Capex stabilized at ~ €250m per year•

28 openings and 26 closings in FY 2016•~ 40 renovation and relocation projects to keep fresh the shopping experience

FY 2016 Results Presentation – April 12th 201714

Net financial position
Strong cash flow enabling NFP turning positive(€m)
Positive Change
Negative Change

222(229)

109(281)
284
NFP
NFP
Jan-16
Jan-16(111)Net Income

Net Operating
Working Capital

D&A

Capex

Dividends

29

23

Other

NFP
Jan-17

Note: NFP without related parties

FY 2016 Results Presentation – April 12th 201715

Dividend policy
307
281

281

281

2012

2013

2014

2015

2016

Dividend
payout (%)

37%

45%

62%

85%

111%

Dividendper share (€)

0,090,110,110,110,12230

Dividend
Yield (*) (%)

3.1%(*) share price as at January 31st 2017

FY 2016 Results Presentation – April 12th 201716

Commercial Update
Patrizio Bertelli
CEOFY 2016 Results Presentation – April 12th 201717

Path to digital excellence
Focused e-commerce and commercial platforms
Talented hires to drive digital strategy•

New team fully dedicated to develop the Group’s digital strategy•

Chiara Tosato will lead the team, bringing digital and media expertiseFirst wave of a global e-commerce
platform roll-out plan•

By year end: China, Korea, Australia,
New Zealand and Russia. Othercountries to follow in 2018

Accelerating ready-to-wear online
rollout•

Launch of Prada women’s and men’s
RTW and Miu Miu women’s RTW
collections on own e-commerce
platform•

All products across all brands to beavailable online by year end

FY 2016 Results Presentation – April 12th 201718

Path to digital excellence
Seamless integration of channels
New commercial Prada and Miu Miu sites to drive more traffic and higher
conversion rates•

Release of new websites to launch in the summer with improved layout,
functionality and design•

Faster links to check-out and enhanced customer touchpoints•

Advanced CRM software updates•

Dynamic styling and story-telling to deliver online experience true to Prada’s DNA•

Localised websites for China, other major Asian markets and Middle East

Stronger link between social and sales•

Deepening engagement with consumers across all social media channels•

Most direct link between post on social media and sales (WeChat, Line,Instagram, etc.)
Ambitious multi-platform marketing strategy blurring offline and online•

Prada365 strategy encompasses all channels across digital and traditional•

The concept uses multiple narratives and visual identities to showcase
collections throughout the year•

Part of Prada's broader strategy to respond to ever-shifting customer needs forinnovation and newness

FY 2016 Results Presentation – April 12th 201719

RetailHarnessing innovation and creativity to drive in-store sales
Focus shifted from store expansion to retail
optimization•Rationalisation of retail network with selectiveopenings and strategic closings•

28 store openings, 26 closures in 2016

Global investment in renovations and store
concepts• 50 renovation projects across Prada stores in 2017
• Miu Miu ‘Blue Tale” concept to be rolled out across
100 Miu Miu stores• Reinterpretation and renewal of store looks
throughout the season, drive return visits andloyalty• Pop up store project: creating excitement aroundnew concepts and product launches• Resort concept to reflect local culture withspecifically designed products (St Barts last year,
Porto Cervo May 2017)

FY 2016 Results Presentation – April 12th 201720

Retail
Creativity permeates all categories and collections
Increased pace of innovation•Launched many new products and bag families in H2/Q4•

Newness across all categories very well received by the customers•

Excellent reception to new fabrics, details, embellishments and personalizations•Strong pipeline of new products to land in 2017

FY 2016 Results Presentation – April 12th 201721

Wholesale
Positive growth driver
After several years of rationalization the wholesalechannel now positively contributes to the Group’sgrowth, thanks to strong results from partnerships
with luxury e-tailers (Net-A-Porter, MyTheresa)
Partnerships with leading e-tailers forms part of theGroup’s broader digital strategy•

Supporting the development of a truly omnichannel
offer with the integration of online and offline•

Excellent results from fashion products, particularly
RTW for both men and women

FY 2016 Results Presentation – April 12th 201722

Licensing
Continued positive trends
Licensing business continues to grow•

Positive trends in both fragrances and eyewear

New fragrances performed strongly•Prada La Femme and L’Homme received
extremely well•

Launch of Les Mirages, a new range of fourunisex Prada additions to the Olfactories
collection of fragrances•Excellent reception to first-ever Miu Miu
fragrance, followed by launch of Miu MiuL’eau Bleue

FY 2016 Results Presentation – April 12th 201723

Outlook
Patrizio Bertelli
CEOFY 2016 Results Presentation – April 12th 201724

Outlook
Confidence in the future growth of the Group
Leverage our iconic heritage and creativity tocontinue to deliver unparalleled innovation and quality
Accelerate the omnichannel experience, withenhanced online presence and in-store digital
environment
Development of Prada and Miu Miu Pop-up Storesproject around the world supported by integrated
digital strategy
Streamlined cost structure puts us in a strong position
to convert future revenue into profitability2016 marks a turning point as we are now firmly on
the pathway to sustainable growth
As a sign of our confidence in the future Group’sgrowth, we will propose a dividend of € 12 cents pershare, an increase of 9% on last year thanks to thestrong free cash flow generation

FY 2016 Results Presentation – April 12th 201725

Q&A SESSIONAPPENDIXFY 2016 Results Presentation – April 12th 201727

Retail overview - 620 Dos at 31 Jan 17
2 Net openings

JAPAN: 78 (+4)

EUROPE: 220 (-2)

NORTH AMERICA& MEXICO: 102 (-4)

ASIA (EX-JAPAN): 187 (+4)
MIDDLE EAST: 20

SOUTH AMERICA: 11
AFRICA: 2

Note: Total of 620 Dos includes 3 Marchesi shops in Italy

FY 2016 Results Presentation – April 12th 201728

Net Sales by Channel (€ mn) – Full Year

2015% change
as reported

2016

Retail
3,060

87%

2,635

84%

-14%

444

13%

504

16%

+13%

3,504

100%

3,139

100%

-10%

WholesaleTotal

FY 2016 Results Presentation – April 12th 201729

Net Sales by Geography (€ mn) – Full Year

2015

Europe% change
as reported

2016

1,292

37%

1,190

38%

-8%Americas

52515%

45915%-13%

Far East

1,15833%993

32%

-14%

732

21%

622

20%-15%

Japan

408

12%

389

12%

-5%

Middle East

1153%

103

3%

-10%

Others

60%

50%

-19%

Total

3,504

100%

3,139

100%

-10%

Greater China

FY 2016 Results Presentation – April 12th 201730

Net Sales by Product (€ mn) – Full Year

2015% change
as reported

2016

Leather Goods

2,103

60%

1,804

57%

-14%

Footwear

726

21%

679

22%

-7%

Ready to Wear

612

17%

600

19%

-2%

Others

632%

562%

-9%

Total

3,504

100%

3,139

100%

-10%

FY 2016 Results Presentation – April 12th 201731

Net Sales by Brand (€ mn) – Full Year2015

% change
as reported2016

Prada

2,841

81%

2,528

81%

-11%

Miu Miu

564

16%

515

16%

-9%

Church’s

822%

80

3%

-3%

Other

171%

16--6%

Total

3,504

100%

3,139

100%

-10%

FY 2016 Results Presentation – April 12th 201732

Group P&L€ mn2016

2015

Net Sales

3.139,398,6%

3.504,3

98,8%Royalties

44,8

1,4%

43,4

1,2%

Net Revenues

3.184,1100%

3.547,8

100,0%

COGS(895,0)28,1%(980,2)27,6%Gross Margin

2.289,171,9%2.567,6

72,4%

Product Development(125,3)

3,9%(134,3)3,8%Advertising & Promotion(172,5)5,4%(191,7)

5,4%

Selling(1.383,3)43,4%(1.517,4)

42,8%

G&A

(176,8)5,6%(221,3)

6,2%

EBIT

431,2

13,5%

502,9

14,2%

Net Financial Income (Expenses)(15,8)

0,5%(27,5)

0,8%

Income Taxes(131,2)4,1%(142,0)4,0%Net Income

284,2

8,9%

333,4

9,4%

Minority Income

5,90,2%

2,40,1%

Group Net income

278,3

8,7%

330,9

9,3%

D&A

222,3

7,0%

299,9

8,5%

EBITDA

653,4

20,5%

802,822,6%

FY 2016 Results Presentation – April 12th 201733

EBIT development
Industrial efficiencies and cost reduction supporting margins

14.2%

-0.5%

2015

GM-0.6%

Selling

0.0%

A&P

+0.6%

-0.1%

13.5%

G&A

P&D

2016

Positive change
Negative change

FY 2016 Results Presentation – April 12th 201734