FY 2018 Results Presentation
Milan, March 15th 2019

AgendaPresentation
14:30 – 15:00
Patrizio Bertelli – CEO• 2018 Overview and Business update
Alessandra Cozzani – CFO• FY 2018 Financial Review
Lorenzo Bertelli – Head of Marketing and Communication• Tech Roll-out
Carlo Mazzi – Chairman• Outlook
Q&A Session
15:00 – 15:30

FY 2018 Results Presentation – March 15th 20191

2018 Overview and Business update
Patrizio Bertelli
CEOFY 2018 Results Presentation – March 15th 20192

2018: focus on execution
Overall good performance in a challenging environment•Positive sales trends across all regions and categories•

Increased full price sales•

Geopolitical environment causing uncertainty

Transformation plan demonstrated results•

Targeted execution of our plan: channels,
merchandising, communication•

Investing in foundations of platform for growth•Technology and digital strategy in place and delivering•

Enhanced human capital

Our Brands: a unique asset•

No compromise on our core values•

Brand integrity at the heart of any decisions

FY 2018 Results Presentation – March 15th 20193

Brand integrity is our guiding principle

CHANNELSMERCHANDISINGCOMMUNICATIONInvestment in brand, technology,production and organisation

FY 2018 Results Presentation – March 15th 20194

Channels
Investment in pop-ups and events leveraging omnichannel portfolio
Driving excitement and customer engagement
through pop-ups and store events• Roll-out of 48 pop-up stores and 50 Linea Rossa
2.0 special set ups in FY-18• Fully integrated with digital and social campaigns• More than 700 promotional events in FY-18 tostrengthen relationships with local clients
Continuous optimisation of the retail network• 29 new openings and 20 closures in FY-18• ~ 120 renovation and relocation projects
Strong double-digit growth in e-commerce throughown on-line platforms
Selective approach when choosing our wholesale
partners to manage a controlled growth strategy• Partnerships with e-tailers reinforced by exclusive
capsule collections – 20 drops in FY-18• Focus on top-tier wholesale partners

FY 2018 Results Presentation – March 15th 20195

MerchandisingInterpreting market trends leveraging our brands’ unique heritage
Leather Goods – improved offer across all strategic pricingpoints• Broad-based organic growth driven by both iconic and newlines (i.e. Prada Sidonie, Margit, Sybille, Odette, Belle,Ouverture)• Bags and Viaggio outperforming
RTW – double digit performance confirming design leadership• Prada Men and lifestyle collections outperformed• Positive response to the relaunch of Linea Rossa collection• High single-digit growth for Miu Miu ready-to-wear collection

Footwear – successful collections building on longstanding
expertise in lifestyle and sportwear• Outperformance of sneakers for both men and women

FY 2018 Results Presentation – March 15th 20196Communication
Targeting new audiences through brand experience
First Prada Mode•

Prada's roving club offering its members unique experiences with a focus
on contemporary culture•

An extension of major global cultural events (e.g. Art Basel Miami – Dec 2018)enhancing brand visibility

Miu Miu Club in Shanghai•

The Miu Miu Croisière 2019 collection travelled to Shanghai•

The show was held at the legendary Waldorf Astoria hotel in a unique setting
designed by artistic director Tu Nan

FY 2018 Results Presentation – March 15th 20197Communication
Building brand identity and awareness through global sponsorship
Prada to sponsor Luna Rossa and the 36th America’s Cup•

For the first time Prada is the Title and Presenting sponsor of the 36th America’s Cup•

Preliminary series to take place in 2019-2020•The final competition will take place in Auckland in March 2021

•The sponsorship provides global brand exposure with events and social media campaigns

The Prada Cup trophy•

For the first time the Challengers’ Selection Series for the America’s Cup, which will start inJanuary 2021 in Auckland, will carry the Prada name

FY 2018 Results Presentation – March 15th 20198

2018 Financial Review
Alessandra Cozzani
CFOFY 2018 Results Presentation – March 15th 2019

9FY 2018: at a glance
Condensed P&L

Investment delivering growth€mFY 2018

FY 2017 (*)

Net Revenues

3,142

100.0%

3,056

100.0%

COGS

(880)

28.0%

(811)

26.5%

Gross Margin

2,263

72.0%

2,246

73.5%

Selling(1,414)45.0%(1,399)45.8%

Advertising & Promotion

(207)

6.6%

(185)

6.0%

Product Development

(125)

4.0%

(130)

4.3%

G&A

(192)

6.1%

(171)

5.6%

Operating Expenses

1,939

61.7%

1,886

61.7%

EBIT

324

10.3%

360

11.8%

Tax rate%

31%

Group Net Income

2056.5%

249

8.1%

D&A

227

7.2%

228

7.5%

EBITDA

551

17.5%

588

19.2%

30%

• Good Net Revenue performance - up by 6% at constant FX, mainly driven by full-price sales• Opex increase mainly driven by brand investments in advertising and digital• Margins impacted by negative FX / hedging: stable underlying trend• 2019 fiscal year will benefit from Patent box(*) 12 months ended December 31stFY 2018 Results Presentation – March 15th 201910

FY 2018: at a glanceSound financial structure
Condensed Balance Sheet and Cash Flow
€m31 Dec 1831 Dec 17

Non current assets

2,700

2,565

Net operating working capital

638

546

Other current assets / (liabilities), net

(38)

(21)

Other non current assets / (liabilities), net

(90)

(121)

Net invested capital

3,211

2,970

Consolidated shareholders’ equity

2,897

2,866

Net financial position (surplus) / deficit

314

104

Equity + Net Financial Position

3,211

2,970

Operating cash flow365

447 (*)

Capital expenditure284

251 (*)• Increase in working capital in line with merchandising strategy• Gearing ratio low at 11%• Increase in Capex driven by further investments in retail, software capabilities and industrial projects(*) 11 months
FY 2018 Results Presentation – March 15th 201911Net Sales by Channel (€ mn) – Full Year
Full-price sales driving growth
2017

2018

% change
as reported% changesame FX

Retail

2,444

81%

2,532

82%

+4%+7%

Wholesale

565

19%

566

18%

-+1%

Total

3,008

100%

3,098

100%

+3%+6%

Retail• Ongoing strategic reduction of markdown sales impacted by low single digit sales trends; more pronounced in H2 than H1• Regular sales consistently up across the two semesters• Strong double digit growth from e-commerceWholesale• Positive performance from E-tailers throughout the year despite strong comparatives• Continued selective approach to wholesale partners, notably in Europe

FY 2018 Results Presentation – March 15th 201912

Net Sales by Geography (€ mn) – Full Year
Positive organic trends across all countries
2017

2018

% change
as reported% changesame FX+3%+4%

Europe

1,170

39%

1,189

38%

Americas

432

14%

426

14%

+2%
-1%

Far East

97332%

1,035

33%

+6%

+10%

646

21%

67522%+5%+8%

Japan

337

11%

350

11%+4%+7%

Middle East

933%

94

3%+1%+5%

Others

4-4--5%-3%

3,008

100%

3,098

100%

+3%

+6%

Greater China

Total SalesEurope• Solid retail trends during the year, despite negative impact from social unrest in France• Domestic consumption drove growth boosted by in-store initiatives• Wholesale weighed on trends in H2
Far East• Double digit growth in Asia Pacific mainly driven by Greater China and KoreaAmericas• Sound performance driven by domestic consumption• Tourism weakened on back of USD strength in H2
Japan and Middle East• Solid retail trends supported by both tourism and domestic consumption

FY 2018 Results Presentation – March 15th 201913

Net Sales by Product (€ mn) – Full Year
Growth in all categories; successful product launches delivered
2017

2018% change
as reported% changesame FX

Leather Goods

1,703

57%

1,756

57%

+3%+6%

Ready to Wear

625

21%

666

22%

+7%+10%

Footwear

624

21%

616

20%

-1%

+2%

Others

572%

592%

+4%

+7%

Total

3,008

100%

3,098

100%

+3%+6%

Leather goods•

Solid retail growth at Prada, driven by both iconic and new handbags•

Ongoing rebalancing of product portfolio through new launches in H2 (e.g. Sidonie, Belle, Sybille, Manuelle, Margit, Odette)

Ready to wear•

Positive trends across all brands and markets, with strong performance in Men’s RTW•

Lifestyle lines outperformedFootwear•

Positive retail trend throughout the year•

Successful reception of sneaker collections and lifestyle for both Men and Women

FY 2018 Results Presentation – March 15th 201914

Net Sales by Brand (€ mn) – Full Year
Prada brand driving growth
20172018% change
as reported% changesame FX

Prada

2,461

82%

2,558

83%

+4%+7%Miu Miu

45915%

453

15%-1%+2%

Church’s

712%

692%

-3%-2%

Other

171%

171%

+4%

+4%

Total

3,008

100%

3,098

100%

+3%+6%Prada Good performance across all categories and markets throughout the year Growth underpinned by consistent performance in leather goods
Miu Miu RTW collections very well received; stable trend in footwear and leather goods Wholesale trends in H2 weighed on retail performance
Church’s Wholesale reorganisation offsetting consistent positive trends in retail

FY 2018 Results Presentation – March 15th 201915

Gross margin development
Margins sustained despite FX headwinds

73.5%

-0.1%

-1.4%

72.0%

FY 2017

OtherFX, hedging

FY 2018• Gross margins broadly in line with prior year at constant fx• Ongoing investment in the supply chain, fully paid-for by contribution from increased full price sales

FY 2018 Results Presentation – March 15th 201916

EBIT development
Stable underlying operating margins

+3.1%

-2.9%
-1.4%

11.8%

2017

Gross MarginOpexForex / Hedging

-0.3%

10.3%

One-off

2018• Excluding FX and one off, operating margins remain stable• Opex grew around €90 million, 5% at constant FX, of which circa 30% were variable costs• The remaining Opex was allocated to costs such as advertising, promotional activities as well as retail events
to fuel sales, with the rest spent on growing the workforce to strengthen the organisation

FY 2018 Results Presentation – March 15th 201917

CapexSustainable level of investment to support long term growth284

Capex (€m)251(*) FY 2017 – 11 months

148
141
Corporate, IT&Industrial

Retail136

110

FY-17

FY-18

•

+9 net openings in FY-18: 29 openings and 20 closures•~120 renovation and relocation projects of which ~ 90 at Prada•

IT investment plan part of the Group’s broader digital transformation strategy•Industrial projects: new Prada logistic hub in Tuscany

FY 2018 Results Presentation – March 15th 201918

Net financial position
(€m)
(92)
227
(282)
208
(104)
(314)
(198)
NFP
Jan-16(111)
NFP
Dec-17(314)(73)
Net Income

D&A

Net Operating
Working Capital

CapexDividends

Other

NFP
Dec-18Positive Change
Negative Change

FY 2018 Results Presentation – March 15th 201919

Dividend policy(€m)
307281281

281

230
192
154201220132014

2015

2016

2017

2018

Dividendpayout (%)

37%

45%

62%

85%

111%

77%

75%

Dividendper share (€ cents)

91111

11

12

7.5

6.0

FY 2018 Results Presentation – March 15th 201920

Tech Roll-Out
Lorenzo Bertelli
Head of Marketing and Communication

FY 2018 Results Presentation – March 15th 201921

Tech Roll-Out - 1
Ramping up e-commerce to reach global coverage by 2020

Successful steps in 2018
• New Miu Miu.com launched in Europe• Enhanced access to Prada and Miu Miu experience(Pradasphere and Miu Miu Club)• New Church’s.com
Strong double digit growth in sales through our digitalchannels
2019 activities• Expanding omnichannel functions and improving userexperience• New Miu Miu.com in US, Asia and Middle East
• Launch of Prada & Miu Miu e-commerce in new markets• Launch of Car Shoe e-commerce• Increasing collaborations with marketplaces

FY 2018 Results Presentation – March 15th 201922

Tech Roll-Out - 2
Investing in technology to boost operational efficiency and effectiveness
Digital Retail• Upgraded in-store app “Clientsphere”
New merchandising planning tool
• Technology supporting efficiency and effectiveness in the core processes(merchandising planning, buying, replenishment)
Enhanced customer service• Seamless remote customer experience• New concierge functions launched in 5 regional hubs
Integrating CRM with AI• Set up team of data scientists• Cross-channel marketing automation to enable ad-hoc campaigns based on
behavioural customer analytics• Increased incorporation of data between stores and social media channels
Implementing radio-frequency identification (RFID)• Installation of RFID on our leather goods products to be rolled out on allproduct lines• App to identify product authenticity post sales & gather omnichannel
customer data

FY 2018 Results Presentation – March 15th 201923

Tech Roll-Out - 3
Digital projects driving brand engagement
Ramp-up of digital communication•

Special launches for Prada Linea Rossa•

Prada Delivery Man•

Miu Miu Iconic Wardrobe•

Miu Miu Other Conversations

New digital channels•

Twitter Japan for both Prada and Miu Miu (2018)•Kakao Talk (2019)•Launch of Prada Spotify official profile (2019)

FY 2018 Results Presentation – March 15th 201924

Outlook
Carlo Mazzi
Chairman

FY 2018 Results Presentation – March 15th 201925

Outlook••

The process of business transformation started in 2017 is already delivering positive results. We are:-Continuing the technological roll-out through the digitalization of client relationships to further leverage our competitive
advantage-Enhancing the structure of our organization, taking significant necessary initiatives to fully deploy our brands’ potential

As a result we expect a progressive return to volume and margin growth

FY 2018 Results Presentation – March 15th 201926

Q&A SESSION