Transformation strategy evident in sales by channels

The phase out of seasonal markdowns affected the retail trend by mid-single digit throughout 2019. The significant cut in allocation to wholesale, starting from the S/S 2020 collection, meant that wholesale channel sales were down 4% year on year.

Both these strategic decisions were aimed at ensuring the preservation of brand exclusivity and the value of Group products.

The market reaction was very positive: full price sales increased 6% year on year, which offset the negative impact of ending markdowns and reducing wholesale allocation.

The progress in the second half was visible: +10%, reaching +15% growth in Q4.

Retail improvement across all geographies

• Europe +6% at current FX, including a strong improvement in H2 driven by locals and tourists
• America +11% at current FX, largely supported by local customers
• APAC -2% at current FX, negatively impacted by protests in HK SAR. Excluding HK, retail sales were up 5% at current FX. Momentum of full price sales accelerated in H2, reaching double digit growth (excluding HK), with outperformance in South Korea and in Mainland China
• Japan +9% at current FX, with solid regular sales across the semester notwithstanding VAT increase in October
• Middle East -1% at current FX, showing positive full price sales throughout the year

Creativity in products and communication boosting brand heat and consumer excitement

The continuous investment in creativity and enhancement of communications and marketing efforts dedicated to create new emotional connections and experiences with the brands, delivered improving results for Prada and Miu Miu in all product categories. Moreover, both Prada and Miu Miu achieved double-digit increases in full price sales in H2, with new collections very well received across markets and categories, supported by online and in-store initiatives.

Following on from trends witnessed in the first half of the year, Ready-to-wear sales grew by 12% at current FX, driven by double-digit full price sales across all geographies.

Footwear and leather goods also showed improving growth: Leather goods grew by 2% at current FX, including healthy full-price sales in H2 supported both by iconic lines and newness; Footwear grew by 2% at current FX, including double digit full price sales in H2, sustained by the ongoing strong demand for sneakers and lifestyle collections.

Business transformation strategy and sales rebound supporting key financial metrics – (Full Year 2018 non IFRS 16)

EBIT amounted to Euro 307 million, 9.5% of revenues (Euro 324 million, 10.3% in 2018)

Net income amounted to Euro 256 million, 7.9% of revenues benefitting from the Patent Box tax relief relating to the 2015-2019 years (Euro 205 million, 6.5% in 2018)

During the period, the Group generated operating cash flow of Euro 362 million (Euro 365 million in 2018)

Capital expenditures throughout the period were mainly towards Retail and amounted to Euro 302 million (including the acquisition of a retail property in Madrid)

Net Financial Position at Euro -406 million, following a Euro 154 million dividend payment during the period.

The Board of Directors has proposed to the General Meeting to distribute a dividend of Euro 2 cents per share.

Patrizio Bertelli, Prada Group CEO, commented: “2019 has been a year of strong progress. The combination of investment and operational initiatives implemented over the past few years are now clearly translating into brand heat and sales. We are sure that our commitment to guarantee outstanding quality standards as well as strengthening brand desirability has been the right choice to support profitable and sustainable long-term growth.

The start of 2020 has been very buoyant for the Prada Group; the Coronavirus outbreak has interrupted our growth trajectory. This is a huge and unprecedented event that will draw deeply on our sense of responsibility. Our full concern and support go to the people that are facing these tough times. The safety and the well-being of our colleagues as well as of our customers all over the world are of the greatest importance to us and we will do everything we can to help overcome this crisis together.

Although it is difficult to forecast the evolution of the epidemic, we are expecting a negative impact on this year’s results and we are implementing a comprehensive contingency plan to mitigate it, relying on our flexible supply chain and lean organization.

The soundness of our financial structure gives us the confidence to overcome this exceptional moment and to be ready to capture the recovery when it arises.”