FY 2017 Results Presentation
Milan, March 9th 2018

AgendaPresentation
14:00 – 14:30
Patrizio Bertelli – CEO• 2017 Overview
Alessandra Cozzani – CFO• FY 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

FY 2017 Results Presentation – March 9th 20181

2017 Overview
Patrizio Bertelli
CEOFY 2017 Results Presentation – March 9th 20182

2017 Overview
Successful transformation gathering momentum
Business transformation gathered pace during 2017 with clear positive effectsseen in the second part of the year and continuing into 2018
Thanks to our ongoing strategic initiatives, signs of turnaround are now evident• Sequential improvement across all regions during 2017
• Success of latest leather goods collections• Positive performance of RTW demonstrating our leadership position in design and innovation• Strong growth in Wholesale mainly driven by e-tailers

FY 2017 Results Presentation – March 9th 20183

2017 Financial Review
Alessandra Cozzani
CFO

FY 2017 Results Presentation – March 9th 20184

FY 2017: at a glance
A year of stabilization
Condensed P&L€mFY 17 (*)

FY 16 (*)% change

Net Revenues

3,056.5

3,170.5-3.6%

Gross Margin

73.5%

72.0%

EBITDA

588.0

634.5

EBITDA Margin

19.2%

20.0%

EBIT

360.0

405.6

EBIT Margin

11.8%

12.8%

Net Income

248.9

260.2

Net Income margin

8.1%

8.2%

-7.3%

-11.2%-4.3%• Net Revenues down by 2% at constant FX, showing a positive trend in the second part of the year(+1% at constant FX and -3% reported)• Improved quality of sales and supply chain efficiencies delivering higher Gross Margin• Operating Expenses well under control despite continuing investment in digital and communication• Net income broadly in line year on year(*) Pro-forma 12 months January – December unaudited
FY 2017 Results Presentation – March 9th 2018

5

FY 2017: at a glanceSound financial structure
Condensed Balance Sheet and Cash Flow€m

31 Dec 17

31 Jan 17

Non current assets

2,565

2,600

Net operating working capital

546

556

Other current assets / (liabilities), net

(21)

51

Other non current assets / (liabilities), net

(121)

(121)

Net invested capital

2,970

3,086Consolidated shareholders’ equity

2,866

3,105

Net financial position (surplus)/deficit

104-18Equity + Net Financial Position

2,970

3,086

Operating cash flow

447 (*)

632

Capital expenditure

251 (*)

251• Strong operating cash flow
• Working capital in line with last year and Capex remains fully self-financed(*) 11 months
FY 2017 Results Presentation – March 9th 2018

6

Net sales by Channel
Sequential improvement across the year
% change same FX

JanFeb-July

Aug-Dec

FY 17

Retail-7%-8%-3%-6%

Wholesale

+39%

+4%

+34%

+19%

Total

+4%-6%+1%-2%

Retail• Underlying trends sequentially improved in Aug-Dec17• Partially impacted by ongoing reduction in markdown sales
Wholesale• Strong performance also with the contribution from existing and new partnerships with e-tailers

FY 2017 Results Presentation – March 9th 20187

Net sales by Geography
All regions improved - Greater China the bright spot
Feb-July

Aug-Dec

FY 17

Europe-7%+6%0%

Far East-1%+1%+1%+5%

+10%

+8%

Americas-6%-3%-4%Japan-14%-6%-11%

Middle East

-13%-3%-9%

Others-29%-2%-13%-6%+1%-2%% change same FX

JanGreater China

Total+4%Europe• Improvement in Aug-Dec17 driven by Wholesale
Far East• Double digit organic growth in Aug-Dec17 in Greater China, including HK and MacauAmericas• US improved particularly towards the end of the year thanks to stronger local consumption
Japan and Middle East
• Declining trends significantly mitigated in Aug-Dec17 thanks to improving tourism and domestic demand

FY 2017 Results Presentation – March 9th 20188

Net sales by ProductEncouraging trends across categoriesJanFeb-July

Aug-Dec

FY 17Leather Goods-8%0%-3%

Ready to Wear

+4%+10%+7%

Footwear-9%-4%-7%

Other+6%-5%-1%-6%+1%-2%% change same FX

Total+4%

Leather goods – encouraging trends•

Trends turned positive in Aug-Dec17 at Prada in key regions•

Success of latest collections and iconic lines

Ready to wear – very positive performance continuing•

Positive trends for both Prada and Miu Miu•

Acceleration in the second part of the year

Footwear – sales contraction mitigated•Successful launch of sneakers for both men and women

FY 2017 Results Presentation – March 9th 2018

9Net sales by Brand
Prada resuming growth
Feb-July

Aug-Dec

FY 17Prada-5%+4%0%

Miu Miu-10%-10%-9%

Church’s-10%-8%-8%

Other+12%+2%-4%-6%+1%-2%% change same FX

TotalJan+4%

Prada
•

Organic trends improved in the second part of 2017 driven by all categories

Miu Miu•

12 strategic closures and 90 renovation projects realized in 2017 had a temporary impact on sales, while
positioning Miu Miu for recovery in 2018

•Sustained growth in RTW

Church’s•Temporary impact of Wholesale network restructuring

FY 2017 Results Presentation – March 9th 201810

Gross margin development
Boosted by better quality of sales
73.5%
72.0%

FY 2016+0.8%

Full price+0.7%

OtherFY 2017

• Strong gross margin development supported by higher contribution from full-price sales• Additional contributions from forex and industrial efficiencies

FY 2017 Results Presentation – March 9th 201811

Operating costs
Investing in the brand within a streamlined cost structure
Operating expenses (€m)
+0.5%
+121,876

1,886191

171

123
173

130

1,389

1,399

H1 16FYH117
17
FY+7-20

PD

G&A

1,886+101,876

185

Selling

Advertising & Promotion

Product Development

G&A

FY 16Selling

A&P

Positive Change

FY 17

Negative Change• Operating expenses broadly in line yoy• Effective cost management despite increasing expenses in advertising and digital

FY 2017 Results Presentation – March 9th 201812

CapexInvesting in quality and new store concepts to enhance customer experience
Capex (€m)

251 (*)

251 (**)

100
141

151
110

2017
Corporate&Industrial2016
Retail•2 net openings in 2017 - 25 openings and 23 closures•140 renovation and relocation projects•

Increased investments in production to safeguard quality and strengthen know-how(*) 11 months ; (**) 12 months
FY 2017 Results Presentation – March 9th 201813

Cash flow
Net working capital (€m)

Operating cash flow (€m)

As % of net sales
20%

17%

18%

18%

674

556

553

546

625

527

563

570

314

286

267

290

-265

-256-277-314

Jul 31, 2016

Jan 31, 2017

Jul 31, 2017

Dec 31, 2017

365
267

H1 16

208

H2 16

H1 17239

5-months 17• Consistently strong operating cash flow

Trade Receivables

Trade Payables

Inventory• Working capital management well under control• Normalization of inventory level in 2017
FY 2017 Results Presentation – March 9th 201814

Net financial position(€m)

210(212)10218(308)18
NFP
Jan-17Net IncomeNet Operating
Working Capital

D&ACapex

Dividends

Other

NFP
Jul-17
Dec-17(104)(40)
Positive Change 11 months
Negative Change 11 months

FY 2017 Results Presentation – March 9th 201815

Dividend policy(€m)

307
281

281

281

230
192

Dividend
payout (%)
Dividend
per share (€ cents)

20122013

2014

2015

2016

2017

37%

45%

62%

85%

111%

88% (*)

9111111127.5(*) based on 11 months
FY 2017 Results Presentation – March 9th 201816

Business Update
Patrizio Bertelli
CEOFY 2017 Results Presentation – March 9th 201817

Several factors have contributed to business recovery

RETAIL

MERCHANDISINGThe focal point for
Customer interactions

Brand integrity
delivering results

UNLOCKINGVALUE FROMRETAIL
NETWORKCOMMUNICATIONDIGITAL

Targeting a global audience

Digital transformation driving growth

FY 2017 Results Presentation – March 9th 201818

RetailThe focal point for customer interactions
Leveraging our best-in-class digitally integrated
store network remains our key priority•••

Optimization of global retail portfolio ongoing-25 store openings and 23 closures-

140 renovation and relocation projects

Investment in store experiences-

Roll-out of more than 75 pop-up storeswith unique aesthetic expressions acrossall brands-

Digital retail: improved CRM interactions
through the introduction of new in-store
digital tools

Introduction of new concept stores with different
architectural designs (i.e. Miami)

FY 2017 Results Presentation – March 9th 201819

RetailPop-up stores building excitement and customer engagement•

Roll-out of 75 pop-up stores in 2017
to target new customer segments throughunconventional selling propositions•

Complemented by engaging social media campaigns todrive discussion among key influencers and customers•

Key benefits:••

Widen the client base: more than 50% of purchases
made by new customers•

Strong brand statement translated into a wider
brand awareness•Communicate product novelties in an innovativeway•

Drive traffic/sales to neighbouring stores benefittingfrom the buzz generated by the pop-ups

Prada Silver Line concept well received and to befurther developed in 2018

FY 2017 Results Presentation – March 9th 201820

Merchandising
Brand integrity delivering results•

Leather goods - balance between iconic and newness
achieved– Widening product offering in all strategic price ranges– Reinterpretation of iconic products (Galleria,Black Nylon) conveyed by strong digital campaigns– Successful take off of new lines:
Etiquette, Elektra, Monochrome, Diagramme– Strong performance of Viaggio– More localized merchandising strategy– Prada turned positive in the second part of the year•

RTW – consistently strong performance demonstrating
design leadership– Positive trends for both Prada (men and women)
and Miu Miu– Successful reception of Resort Collection– New lifestyle propositions– Increased focus on MtM for formal items for men•

Footwear – recovery on track– Successful launch of new sneakers(i.e. Prada Cloudbust) for both men and women
driving volume

FY 2017 Results Presentation – March 9th 201821

Communication
Targeting a global audience
Prada Rong Zhai•

A historical residence, dating 1918 and designated as a cultural patrimony of the Jing’andistrict in Shanghai, was brought to its original splendor and magnificence following a long,painstaking restoration process undertaken by Prada•

Opening celebrated in October with a fashion show of the Prada Resort 2018 collection as wellas an exhibition dedicated to the restoration work. Pre-order event followed in December•Gained a hugely successful following on social media

FY 2017 Results Presentation – March 9th 201822

Communication
Targeting a global audience
Prada Double Club Miami•

The “Prada Double Club Miami” by Carsten Höller is an art installation to be experienced
as a fully-functioning nightclub•

Opened in December in occasion of the new Prada concept store opening during Art Basel
Miami Beach•Unique approach to entertainment and hospitality, creating a dialogue between
contemporary art, music, lifestyle and design

FY 2017 Results Presentation – March 9th 201823

Communication
Targeting a global audience
Luna Rossa – America’s Cup•

Entered in sponsorship agreement for the participation of Luna Rossa sailing team in the36th edition of the America’s Cup•The cup will consist of a preliminary series (to take place in 2019-2020), the challenger
selection series (to take place in January/February 2021) and the America’s Cup match(to take place in the first half of 2021) providing global brand exposure with accompanying
events and social media campaign•First time role for Prada as naming and presenting sponsor of the entire sailing competition
providing additional brand exposure

FY 2017 Results Presentation – March 9th 201824

Digital Transformation
Chiara Tosato
Prada General Manager and Digital Director

FY 2017 Results Presentation – March 9th 201825

Digital transformation driving growth
E-commerce roll-out on track• Launched new omnichannel e-commerce platform • Platform on track for global roll-out by year-endPrada.com in China• Improved online presence across all brands- Enhanced online services- Shipping from main Prada stores- Pick-up in store- Book an appointment in store, virtual assistant,chat option, “shop the look”- Improved and simpler navigation with a“mobile first” approach- Wider product choice for all product categories
for men and women- Integrated with social WeChat and Alipay

FY 2017 Results Presentation – March 9th 2018

• Growing relationships with premium e-tailers• Planning a direct presence on major marketplacesworldwide• Double digit growth in sales, both direct as well ason e-tailers

26

Digital transformation driving growth
Digital retail•

The path to digital transformation in Retail started in 2016 pursuing thesegoals:- Engage with customers to offer tailored experiences across all
touchpoints- Empower employees to deliver personalized services- Optimize in-store operations to increase efficiency•

We have equipped all our sale assistants with “personal” digital devices
to interact with our customers in a more effective and trustworthy way•

More than 200,000 customized personal messages sent by our sales
assistants every month to inform our customers of the latest arrivals•

Launch in 2018 of a “Big Data” project with Microsoft, to improve ouranalysis and business intelligence capabilities. This new project will
enable us to consolidate our customer relations through further
personalization of our customer’s experience

FY 2017 Results Presentation – March 9th 201827

Digital transformation driving growth
Investing in digital communications
Increased investment in digital communications to deliver
a consistent message across all channels• Digital advertising represents an increasing portion of mediaspending• Creative content to support “pop-up” stores
Successful launch of digital campaigns• Digital only campaigns to attract younger and newaudiences- The Postman’s Gifts most viewed-ever video in Prada’s
history with millions of viewers- Prada Black Nylon- Miu Miu Women Tales- Miu Miu Whispers
Strategy is delivering results•

Successful sales driver in particular in leather goods andsneakers•

Addressing younger audiences, seeing growth in Gen Y

FY 2017 Results Presentation – March 9th 201828

Outlook
Patrizio Bertelli
CEOFY 2017 Results Presentation – March 9th 201829

Outlook
Looking back. Walking forward.
• The recent performance of the Group is the result ofour strategic initiatives aimed at meeting customers’
expectations while respecting the iconic heritage of
our world renowned brands; that’s the "Prada way" tocompete in the current fast-changing environment• We’ll continue to nurture our creativity with ourunique way to observe contemporary society and tointerpret market trends• We’ll focus on improving the productivity of our global
retail network further strengthening integration
between offline and online offering a seamlessexperience• We’ll continue investing in brand equity throughunconventional communication tools conveying ourvalue and vision in a unique experience• 2018 will be the beginning of a new chapter of theGroup’s history based on long term sustainablegrowth

FY 2017 Results Presentation – March 9th 201830

Q&A SESSIONAPPENDIXFY 2017 Results Presentation – March 9th 201832

Retail overview - 625 Dos at 31 Dec 17
2 Net openings yoy

JAPAN: 79 (+1)

EUROPE: 229 (+9)

ASIA (EX-JAPAN): 184 (-4)
AMERICA 112 (-3)
MIDDLE EAST AND
OTHER : 21 (-1)

Note: Total of 625 Dos includes 3 Marchesi shops in Italy
FY 2017 Results Presentation – March 9th 201833

Group P&L€mFY 2017 (*)

FY 2016 (*)% change

Net Sales

3,008.3

98.4%

3,126.0

98.6%

Royalties

48.2

1.6%

44.4

1.4%

Net Revenues

3,056.5

100.0%

3,170.5

100.0%

COGS(810.9)26.5%(888.8)28.0%

Gross Margin

2,245.6

73.5%

2,281.7

72.0%

Design & Product Development(130.5)

4.3%(123.5)

3.9%

Advertising & Promotion(184.7)6.0%(173.0)5.5%

Selling(1,399.3)

45.8%(1,389.0)

43.8%

G&A

(171.1)

5.6%(190.6)

6.0%

Operating Expenses(1,885.6)

61.7%(1,876.1)

59,2%

+0.5%

EBIT

360.0

11.8%

405.6

12.8%

-11.2%Net Financial Income (Expenses)

(5.0)

0,2%

(17.0)

0.5%

Income Taxes(105.3)

3.4%(122.4)

3.9%

Tax rate%

29.7%

Group Net Income

248.9

8.1%

260.2

8.2%

D&A

228.0

7.5%

228.9

7.2%

EBITDA

588.1

19.2%

634.5

20.0%

-3.6%

-1.5%

31.5%
-4.3%

-7.3%

(*) Pro-forma 12 months January – December unaudited
FY 2017 Results Presentation – March 9th 201834

Net Sales by Channel€m

FY 2017 (*)

FY 2016 (*)% change
as reported% changesame FX

Retail

2,444

81%

2,649

85%

-8%-6%

Wholesale

564

19%

477

15%

+18%

+19%

Total

3,008

100%

3,126

100%

-4%-2%(*) Pro-forma 12 months January – December unaudited
FY 2017 Results Presentation – March 9th 201835

Net Sales by Geography€m2017 (*)

2016 (*)% change
as reported% changesame FX

0%+1%

Europe

1,170

39%

1,182

38%

Far East

973

32%

984

31%

-1%-1%

645

21%

618

20%

+5%+8%

Americas

432

14%

456

15%-5%-4%Japan

337

11%

394

13%-15%-11%

Middle East

933%

105

3%

-11%

-9%

Others40%50%-10%-13%

Total

3,008

100%

3,126

100%

-4%-2%

Greater China(*) Pro-forma 12 months January – December unaudited
FY 2017 Results Presentation – March 9th 201836

Net Sales by Product2017 (*)€m2016 (*)% change
as reported% changesame FX

Leather Goods

1,703

56%

1,793

57%

-5%-3%

Ready to Wear

625

21%

593

19%

+5%+7%

Footwear

624

21%

682

22%

-8%-7%

Others

572%

58

2%

-3%-1%

Total3,008

100%

3,126

100%-4%-2%(*) Pro-forma 12 months January – December unaudited
FY 2017 Results Presentation – March 9th 201837

Net Sales by Brand
2017 (*)€m2016 (*)% change
as reported% changesame FX

Prada

2,461

82%

2,512

80%-2%0%

Miu Miu

459

15%

515

16%

-11%-9%Church’s712%

81

3%-12%-8%

Other

171%

181%-5%-4%

Total

3,008

100%

3,126

100%-4%-2%(*) Pro-forma 12 months January – December unaudited
FY 2017 Results Presentation – March 9th 201838