H1 2017 Results Presentation
Milan, September 8th, 2017

AgendaPresentation
14:00 – 14:30
Alessandra Cozzani – CFO• H1 2017 Financial Review
Patrizio Bertelli – CEO• Business Update
Chiara Tosato – Prada General Manager and Digital Director• Digital Transformation

Patrizio Bertelli – CEO• Outlook
Q&A Session
14:30 – 15:00

H1 2017 Results Presentation – September 8th 20171

H1 2017 Financial Review
Alessandra Cozzani
CFO

H1 2017 Results Presentation – September 8th 20172

Group P&L€m

H1 2017

H1 2016% change

Net Sales

1,442.6

98.2%

1,529.3

98.4%

Royalties26.1

1.8%

24.9

1.6%

Net Revenues

1,468.6

100.0%

1,554.2

100.0%

COGS(380.0)

25.9%(432.2)27.8%

Gross Margin

1,088.6

74.1%

1,121.9

72.2%

Product Development(66.8)

4.5%(63.7)

4.1%

Advertising & Promotion(82.6)

5.6%(76.0)

4.9%

Selling(679.6)46.3%(678.2)

43.6%

G&A

(92.8)

6.3%(90.4)

5.8%

Operating Expenses

921.8

62.7%

908.2

58,4%

+1.5%

EBIT

166.8

11.4%

213.7

13.8%

-21.9%Net Financial Income (Expenses)

(0.5)

0,0%

(6.2)

0.4%

Income Taxes(50.2)

3.4%(62.2)

4.1%

Tax rate%

30.2%Group Net Income

115.7

7.9%

141.9

9.1%

D&A

112.7

7.7%

116.3

7.5%

EBITDA

279.6

19.1%

330.0

21.2%

-5.5%

-3.0%

30.0%
-18.4%-15.3%• Better quality of sales supported higher gross margin• Operating expenses well under control resulting in a satisfactory level of profitability
H1 2017 Results Presentation – September 8th 20173

Group Balance Sheet and Cash Flow€m

31 Jul 17

31 Jan 17

31 Jul 16

Non current assets

2,530

2,600

2,561

Net operating working capital553556

674

Other current assets / (liabilities), net

51

51

17

Other non current assets / (liabilities), net

(116)

(126)

(91)

Net invested capital

3,018

3,081

3,161

Consolidated shareholders’ equity

2,799

3,104

2,915

Net financial position (surplus) / deficit*

219

(23)

246

Total

3,018

3,081

3,161

Operating cash flow

208

632

267

Capital expenditure

106

251

108

• Strong operating cash flow thanks to disciplined approach to cost and working capital management• Capex now at normalised levels• Net financial position remains healthy; turned negative in the period due to dividend payments• Balance sheet remains very strong
Note: *NFP without related parties

H1 2017 Results Presentation – September 8th 2017

4

Net sales by channel
Quality of retail sales improved, solid performance from wholesale
H1 17 split
H1 2017

H1 2016% changesame FX

Retail

1,177

1,277

-8.0%

Wholesale

265

252

+4.5%

€m

18%

82%

Total

1,443

1,529

-5.9%
RetailWholesale

Retail• Trends impacted by strategic decision to significantly reduce the markdown sales• Contrasting trends across countries and categories• 7 net closures (+6 openings -13 closures) during the period resulting in 613 DOS• Digital strategy on track resulting in growing online sales
Wholesale• Solid results driven by strong e-tailer partnerships, thanks to both existing and new customers

H1 2017 Results Presentation – September 8th 2017

5Net sales by geography
Robust growth in Greater China
H1 2017

H1 2016% changesame FX

Europe554

600

-6.6%

Asia Pacific

463

461

-0.6%

Greater China

302

289

+5.2%

America

210

218

-5.8%

Japan

164

192

-14.2%

Middle East4956-13.1%

Other22-Total

1,443

1,529-5.9%€mH1 2017 split
3%

38%

32%

11%

EuropeAsia Pacific15%
America
Middle EastJapanOther• Europe trends slowed later in the period due to euro appreciation and tough comparable base (Brexit)• Asia Pacific improvement mainly due to Greater China- Positive retail trends in China, Hong Kong and Macau- Korea impacted by political tensions• Less declining trend in America- Organic growth in Canada and Mexico- Good performance from US department stores• Japan remained impacted by weak tourist spending and domestic spending• Middle East reflected ongoing geopolitical tension
H1 2017 Results Presentation – September 8th 2017

6Net sales by product
Mixed performance in leather goods, RTW very well received€mH1 2017

H1 2016% changesame FX

H1 2017 split
2%
19%

Leather Goods

827

894

-7.9%

Footwear

310

344-9.5%

Ready to Wear

274

262

+4.1%

Other

32

29+5.7%

Total

1,443

1,529

-5.9%

57%

22%

Leather Goods

Footwear

Ready to Wear

Others Leather Goods showing mixed performance- Excellent reception to new collection (i.e.“Prada Etiquette”, “Prada Cahier”, “Paradigme”) in all markets- Very encouraging trend in Prada Asia Pacific Very good performance from Ready to Wear
- Positive organic growth across all brands in all key regions witnessing the leadership in design

H1 2017 Results Presentation – September 8th 2017

7Net sales by brandH1 2017

H1 2016% changesame FX

Prada

1,177

1,234-5.0%

Miu Miu

224

249-10.2%

Church’s

3440-10.5%

Other87+11.9%

Total

1,443

1,529-5.9%€m0.5%

H1 2017 split
16%2%

82%

Prada

Miu Miu

Church’sOther Improving trend at Prada compared to H2 16, albeit negative impacted by strategic decision to reduce markdown Miu Miu negatively impacted by store closures (8 during the period)
 Church’s impacted by recent restructuring of Wholesale channel

H1 2017 Results Presentation – September 8th 20178

Gross margin development
Boosted by better quality of sales

72.2%

H1 16+0.8%

Full price+1.1%

Other

74.1%

H1 17

• Strong gross margin supported by higher contribution of full-price sales• Other includes forex and industrial efficiencies

H1 2017 Results Presentation – September 8th 20179Operating costs
Investing in the brand within streamlined cost structure+1.1% atconstant rate

Operating expenses (€m)

922

+1.5%

+3908

922

906476936782678680

H1 16

H1 17Selling
Product Development

Advertising & Promotion
G&A+3+6908

H1 16+2Selling

Positive Change

A&P

P&D

G&A

H1 17

Negative Change• Successful cost reduction programme completed last year still delivering results• Increasing spending on digital media• Operating expenses increased due to normalized level of incentive plans
H1 2017 Results Presentation – September 8th 201710Capex
Focus on store renovations and industrial know-howCapex (€m)
As % of net sales:
7%

9%

7%

144
108623870106
428164

Corporate&Industrial
RetailH1 2016

H2 2016

H1 2017

 7 net closures – 13 closures and 6 openings
 76 renovations and 15 relocations
 Continued investments in production to preserve quality and know-how, ~50% of the corporate and industrial
capex in H1-2017
H1 2017 Results Presentation – September 8th 201711Cash flow
Net inventories (€m)

Operating cash flow (€m)

As % of net sales
19%

17%

18%625527526423

365563444267
208

H1 16

H2 16

H1 1799104

119

Jul 31, 2016

Jan 31, 2017

Jul 31, 2017

Raw Materials & Work in Progress

Finished Products• Consistently strong operating cash flow
• Driven by tight control of costs and disciplined working capital management• Slight increase in stock to fill stores with better inventory level

H1 2017 Results Presentation – September 8th 201712

Net financial position(€m)

113

(104)

4116

(307)

18

NFP
NFP
Jan-17Jan-16(111)Net Income

Net Operating
Working Capital

D&ACapexDividends

Other

NFP
Jul-17(223)(63)
Positive Change
Negative ChangeH1 2017 Results Presentation – September 8th 201713

Change of Fiscal Year-end to December 31, 20172017 Annual Report will include
IFRS Mandatory 2016 – 12 months

Feb 16IFRS Mandatory 2017 – 11 months

Jan 17

Feb 17

Pro-Forma 2016 – 12 months

Jan 16

H1 2017 Results Presentation – September 8th 2017

Dec 17

Pro-Forma 2017 – 12 months

Dec 16

Jan 17

Dec 1714

Business Update
Patrizio BertelliCEO

H1 2017 Results Presentation – September 8th 201715

H1 Overview
Transformation underway• We are in a phase of profound change• Our strategy built around our brand integrity and value is the best way to return tosteady growth albeit taking longer than expected• Initiatives to unlock the value of our global retail network - three key actions thishalf:- Enriched product offer in upper price range- Refreshed shopping experience by creating excitement around new store
concept- Progressed digital strategy, moving towards seamless channel integration• Leadership position in design and innovation evidenced by consistently solid
performance of RTW and strong reception to Leather Goods novelties• We are confident that there are significant untapped opportunities, such as indigital and in building out the Leather Goods offer across all price ranges

H1 2017 Results Presentation – September 8th 201716

Retail strategy
Unlocking value from the retail network• Even in a digital era, the retail network remains themost important touch point- Luxury costumers still heavily influenced by what
they see and experience in physical stores• Continuing the roll-out of new store concepts thatoffer creative interpretations of Prada’s and Miu Miu
iconic heritage: ~100 projects in H1 2017
- Miu Miu “Blue Tale” concept launched in 60 stores- 35 Prada store concept projects (modular, graphicrooms, and resort)- Resort concept rollout in Porto Cervo and St Tropez

H1 2017 Results Presentation – September 8th 201717

Retail strategy
Unlocking value from the retail network• Using “pop-ups” to create new customer experiences, building excitement around new store concepts andproduct launches- 13 Prada and Miu Miu pop-ups• Tokyo, Osaka (Prada My Character, Robot)• Takeover of Paris Galeries Lafayette (Prada Etiquette, My Character, Stickers)• Shanghai IFC Mall and Nanjing Deji (Miu Miu Lady)• Fully integrated with social media, to drive discussion among key influencers and customers

H1 2017 Results Presentation – September 8th 201718

Merchandising strategy
Built around our brand integrity and valuesStrong focus on building out product offer
across all strategic price ranges

Increased investment in product development
and manufacturing to leverage iconic heritage,
safeguard quality, and elevate know-how

Strategy already delivering results–Successful launch of new products in the highend (Cahier, Etiquette, Paradigme, Ribbon)–

Global growth in RTW, outperforming marketand making increased contribution to sales–Positive performance of menswear and travelbags

Raising awareness of enhanced product offering
through sustained investment in advertising andpromotion

H1 2017 Results Presentation – September 8th 201719

Digital Transformation
Chiara Tosato
Prada General Manager and Digital Director

H1 2017 Results Presentation – September 8th 201720

Digital excellence driving growth
E-commerce roll-out on track• Highly customizable and localized e-commerce platform rolled out in Europe and US- Improved user experience, fresh design and richer media content- Cost-efficient logistics model- Integrated with social networks, including local payment methods- Easy to optimise for local languages- Aim to more than double SKUs on the platform by year end• Platform to launch in key markets by end 2017
- Including China, Korea, Japan, Australia and Russia- Global coverage by end 2018

•Luxury e-tailer partnerships enhance andcomplement digital strategy- Working with all major luxury online retailers (Net-aPorter, MyTheresa, Matches Fashion etc.)

H1 2017 Results Presentation – September 8th 201721

Digital excellence driving growthProviding a seamless shopping experience•

Fully integrated digital and retail strategies, leveraging all
consumer touch points•

Strengthened omnichannel strategy catering to all customer
segments and habits•

4 ways to shop online and in-store available by year end•

Enhanced CRM to build a 360 degree view of the customer•

Services to be rolled out by year end include:- 7/7 customer service on email and phone (already in Europeand US)- Instant chat, digital assistants, and online personal shoppers- Same day delivery, on a city-by-city basis

H1 2017 Results Presentation – September 8th 201722

Digital excellence driving growth
Investing in digital communications- Increasing investment in digital communications- Now represents a relevant portion of total media
spending- New, comprehensive strategy- Coverage of all channels- Increased focus on product- Targeted advertising for specific audiences- Innovative use of content- Localised campaigns and commercial strategies- Creative content to support “pop-up” stores

Dynamic and consistent communications withnew and existing customers at every touchpoint
Leveraging brand strength and consumerinterest to drive traffic in stores
H1 2017 Results Presentation – September 8th 201723

Outlook
Patrizio Bertelli
CEOH1 2017 Results Presentation – September 8th 201724

Outlook
Priming the business for a return to growth•

We are confident in the the long-term prospects
for the luxury sector•

We are responding to changes in consumer
patterns with measures to transform the businesswhile taking care to preserve the iconic heritage of
our world-renowned brands•

This approach is protracting the transformation
process, but will pave the way for long-termgrowth•

Disciplined approach to costs, investments andworking capital will continue to protect cash flow
and safeguard future dividends•The Group’s balance sheet remains strong, giving
us the freedom to focus on creating value forshareholders over an extended time horizon

H1 2017 Results Presentation – September 8th 201725

Q&A SESSION