Company Operations and Structure - Prada Group operates over 612 directly operated stores and employs more than 13,700 staff globally[10]. - The company has a presence in over 70 countries, selling luxury goods through various channels including direct e-commerce and selected department stores[10]. - The company has established 24 production facilities worldwide, enhancing its operational capabilities[10]. - Prada Group operates 612 directly operated stores in prime locations of major international shopping centers, serving as a strategic asset for brand promotion and sales monitoring[47]. - As of December 31, 2022, Prada Group employed 13,768 individuals from 113 countries, with women representing 63% of the total workforce[55]. - The company has 24 production facilities, with 21 located in Italy, ensuring high-quality craftsmanship and flexibility in production processes[46]. - Prada Group's structure includes various subsidiaries across multiple regions, including retail operations in the Middle East, Europe, and Asia[77]. - Several subsidiaries, including PRM Services S. de R.L. de C.V. and Prada Maroc Sarlau, are currently undergoing liquidation processes[78]. - The company maintains a strong retail presence in key markets such as Dubai, London, and Tokyo, with 100% ownership in many subsidiaries[77]. Sustainability and Ethical Practices - Prada Group's mission emphasizes sustainable development as a core part of its business strategy[13]. - The group announced a zero-fur policy for all brands in 2019 and joined the Fashion Pact, promoting sustainability in the fashion industry[20]. - The establishment of a new sustainability committee in 2022 led to the creation of a new ethical code and human rights policy applicable across the group[20]. - Prada Group's commitment to sustainability includes the establishment of a sustainability committee in early 2022 to oversee environmental and social initiatives[54]. - Prada has transitioned to using Re-Nylon, a sustainable material, and has committed to a fur-free policy since the Spring/Summer 2020 collection[59]. - The Group became a founding member of the Re.Crea Consortium in 2022, aimed at managing waste textiles and promoting innovative recycling solutions[59]. - Prada's "Sea Beyond" educational project, launched in 2019, raises awareness about sustainable development and marine protection, with funding linked to sales from the Re-Nylon collection[59]. - The group has identified significant ESG risks including climate change, human rights, and occupational health and safety, and plans to enhance control systems to integrate ESG considerations into business strategies[133]. - The board approved a new ethical code in July 2022, which includes commitments to environmental protection as a key element[172]. - The company focuses on long-term relationships with suppliers, ensuring adherence to high ethical standards and quality requirements[174]. Financial Performance - Prada Group reported a net income of €469,155 thousand for the year ending December 31, 2022, representing an 11.2% margin on net revenues, compared to €295,103 thousand and an 8.8% margin in the previous year[138]. - The company reported a total equity of €255,882,400, equivalent to 2,558,824,000 shares at €0.10 per share[81]. - The company achieved a net income of €465,193, a 58.1% increase from €294,254 in the previous year[85]. - The gross profit margin improved to 78.8%, compared to 75.7% in the previous year, reflecting a strong operational performance[85]. - Adjusted EBIT for the year was €845,176, which is 20.1% of net revenue, up from 14.8% in the previous year[86]. - Prada Group reported a net revenue of €4,200.7 million for the fiscal year 2022, representing a 24.8% increase compared to the previous year, with a fixed exchange rate growth of 21.3%[91]. - Retail sales net amount reached €3,736.97 million, reflecting a 27.5% increase at current exchange rates and a 23.8% increase at fixed exchange rates[92]. - The company closed 40 stores, including 24 Church's stores due to restructuring, resulting in a total of 612 stores as of December 31, 2022[93]. - The total capital expenditure for the year was €276.1 million, with significant investments in store redesigns and technology projects[107]. - The net financial position improved, with a net financial surplus of €534.9 million as of December 31, 2022, compared to €237.7 million in 2021[109]. Innovation and Product Development - Prada Group's innovative approach has led to the introduction of new business models and direct control over production processes[15]. - The company aims to enhance brand value and recognition over time, focusing on creativity and transformation[10]. - Prada launched its first fragrance, Paradoxe, in collaboration with L'Oréal in 2022, marking a significant expansion in luxury beauty products[20]. - The group introduced the Eternal Gold jewelry collection, made from 100% certified recycled gold, furthering its commitment to sustainability[20]. - The company has invested significantly in training and passing on craftsmanship skills to younger generations through the Prada Academy[46]. - The company is committed to innovation in product development, particularly in eyewear and fragrance licensing[162]. Marketing and Brand Strategy - Prada Group's marketing strategies leverage fashion shows and advertising campaigns to enhance brand visibility and engage with international customers[53]. - The company has streamlined its wholesale channels over the past few years, focusing on selective partnerships with department stores and multi-brand retailers[53]. - Prada Group's e-commerce platform enhances customer experience and complements physical stores, reflecting a multi-channel strategy[47]. - The company aims to enhance stakeholder value by combining economic profitability with employee and customer satisfaction, while respecting ethical and environmental values[172]. Leadership and Governance - The board of directors includes key figures such as Andrea Guerra (CEO) and Patrizio Bertelli (Executive Director), ensuring experienced leadership[81]. - The company appointed Andrea Guerra as CEO in January 2023, marking a significant governance change aimed at further developing the Prada Group[90]. - The company emphasizes the importance of sustainability and corporate social responsibility in its strategic initiatives, as highlighted by the expertise of its board members[155]. - The management team has extensive experience in the fashion and luxury goods industry, with key personnel holding significant positions in various companies prior to joining Prada[165][166]. Community Engagement and Social Responsibility - The company made charitable contributions totaling €3,959,250 in 2022, an increase from €2,891,906 in 2021[176]. - Prada Group's flagship store in Shanghai serves as a cultural activity center, reflecting the company's commitment to historical preservation and cultural engagement[64]. - The Prada Foundation hosted ten research exhibitions at its Venice site since 2011, focusing on contemporary art and cultural discussions[65]. - The group has established an industrial compliance committee since 2010 to oversee compliance with international and local legal standards[171].

Prada S.p.A. (OTCPK:PRDSY) Q4 2022 Earnings Conference Call March 9, 2023 8:00 AM ET Company Participants Andrea Bonini - Chief Financial Officer Patrizio Bertelli - CEO & Founder Lorenzo Bertelli - Marketing Director and Head of CSR Andrea Guerra - CEO Conference Call Participants Susy Tibaldi - UBS Thomas Chauvet - Citi Edouard Aubin - Morgan Stanley Melania Grippo - BNP Paribas Exane Paola Carboni - Equita SIM Chris Gao - CLSA Liwei Hou - CICC Operator Good day and thank you for standing by. Welcome to t ...

Financial Highlights - The Group's net revenues reached €4201 million, a 21% increase compared to FY-21 and a 32% increase compared to FY-19[18] - Retail sales amounted to €3737 million, reflecting a 24% increase compared to FY-21 at constant exchange rates[4] - The adjusted EBIT margin was 201%, equivalent to €845 million[4, 18] - The group achieved a net cash position of €535 million[4] - Gross margin improved to 788%, amounting to €33 billion[4] Brand Performance - Prada retail sales increased by 25% compared to FY-21, driven by brand momentum and client engagement[27] - Miu Miu retail sales grew by 20% compared to FY-21, with acceleration in the second half of the year[27] Channel and Geographic Performance - Retail channel experienced a 24% growth compared to FY-21, driven by like-for-like and full-price sales[20] - Europe showed outstanding performance with a 63% increase in retail sales compared to FY-21, while Asia Pacific retail sales decreased by 2%[23] Strategic Investments - The company accelerated investments in retail, IT, and industrial infrastructure, with approximately 80% of retail capital expenditure allocated to renovation and relocation projects[32, 33]

Financial Performance - PRADA Group reported a revenue increase of 20% year-over-year for the first half of 2022, reaching €1.5 billion[2]. - The company achieved a net profit of €300 million, representing a 25% increase compared to the same period last year[2]. - For the six months ended June 30, 2022, the net revenue reached €1,900,942 thousand, representing a significant increase from €1,501,006 thousand in the same period of 2021, marking a growth of 26.6%[29]. - The net income for the group was €188,264 thousand, reflecting a 93.8% increase from €97,243 thousand in the previous year, showcasing strong profitability growth[30]. - The financial net profit for the first half of 2022 was €179,479 thousand, a decrease from €237,653 thousand in the same period of 2021, representing a decline of approximately 24.4%[83]. - The company reported a comprehensive income of €188,264,000 for the first half of 2022, compared to €282,991,000 in the same period of 2021[122]. - The company reported a basic and diluted earnings per share of €0.074, up from €0.038 in the previous year[116]. Sales and Market Expansion - User data indicated a 15% growth in active customers, with a total of 2 million new customers acquired in the first half of 2022[2]. - PRADA plans to expand its retail presence by opening 30 new stores globally by the end of 2022[2]. - The company plans to expand its retail footprint by opening 20 new stores globally in 2023[26]. - PRADA's luxury goods segment saw a 30% increase in sales, driven by strong demand in the Asia-Pacific region[2]. - The company is exploring potential acquisitions to enhance its market position in Asia[2]. - The company anticipates continued growth in the luxury market, projecting a 5% to 7% increase in overall sales for the next fiscal year[26]. E-commerce and Digital Strategy - PRADA's e-commerce sales grew by 35%, contributing significantly to overall revenue growth[2]. - Prada's e-commerce sales grew by 30%, highlighting the shift towards online shopping among consumers[26]. - The company is focusing on enhancing its digital marketing strategies to engage younger consumers, aiming for a 25% increase in social media engagement[26]. - The group has entered the Web 3.0 space by launching exclusive limited-edition products with non-fungible tokens (NFTs), marking a strategic move into digital innovation[34]. Sustainability Initiatives - PRADA is focusing on sustainability initiatives, aiming for a 50% reduction in carbon emissions by 2025[2]. - Prada is investing in new product lines, including a sustainable collection that aims to reduce environmental impact by 25%[26]. - The company has established a Sustainability Committee to oversee its long-term sustainable development initiatives[91]. Operational Efficiency - Adjusted EBIT for the same period was €330,802 thousand, which is 17.4% of net revenue, compared to €165,904 thousand or 11.1% in the prior year, indicating a substantial improvement in operational efficiency[31]. - The gross profit margin improved to 77.7% for the six months ended June 30, 2022, up from 74.3% in the same period of 2021, indicating enhanced cost management[29]. - The company has set a target to achieve a 10% increase in operating profit margin by the end of 2023[26]. Financial Health and Investments - The net financial surplus was €179,479 thousand, compared to a deficit of €101,814 thousand in the same period of the previous year, indicating improved financial health[32]. - The company is investing €100 million in new product development and technology enhancements to improve customer experience[2]. - The company is exploring potential acquisitions to strengthen its market position in the luxury segment[26]. - The company has maintained a high level of corporate governance standards, ensuring transparency and shareholder rights[89]. Risk Management - The liquidity risk is managed by the board, ensuring available funds and credit lines are sufficient to meet operational needs and obligations[70]. - The company emphasizes a multi-channel strategy integrating product quality and innovative content to align with consumer demand[64]. - The company has implemented measures to enhance cybersecurity, including a comprehensive IT security plan and training programs for employees[77]. Corporate Governance - The board of directors held meetings with a 100% attendance rate during the review period, focusing on the establishment of a sustainability committee and evaluating the independence of non-executive directors[96]. - The statutory auditor committee monitored compliance with applicable laws and regulations, ensuring the adequacy of the company's organizational and accounting structure[98]. - The company has adopted written procedures regulating securities trading by directors, ensuring compliance with the standards set forth in the listing rules[104]. Manufacturing and Supply Chain - Prada Group operates 23 manufacturing facilities in Europe, with 20 in Italy, ensuring quality control through in-house production of prototypes and samples[66]. - The group continues to invest in factory operations and has identified key steps for leather traceability to enhance supply chain transparency[36]. - The company collaborates with approximately 1,000 suppliers and contract manufacturers, with 80% located in Italy, implementing strict quality control procedures for outsourced production[67].

Market Transformation and Growth - The luxury goods market underwent significant transformation in 2021, driven by the pandemic, with a notable increase in the proportion of younger consumers and contributions from digital sales channels [9]. - The company achieved growth through a higher-margin sales mix, elimination of discount promotions, and a streamlined wholesale distribution strategy [9]. - The company’s e-commerce website expansion contributed significantly to growth, primarily driven by new customers [9]. - Investments in retail space and processes improved store productivity, enhancing brand recognition and customer traffic [9]. - The company completed store renovations and set up pop-up installations, which increased foot traffic and optimized retail image [9]. Digital Engagement and Innovation - The digital community engagement was expanded through effective communication campaigns, including the Prada Spring/Summer 2022 fashion show and sponsorship of the 36th America's Cup [10]. - The company joined the Aura consortium, enhancing customer experience through blockchain technology for greater transparency and traceability [10]. - A newly approved digital development blueprint will introduce new information systems, providing a competitive advantage across all distribution and communication channels [10]. Financial Performance - Net sales for the year ended December 31, 2021, reached €1,805.5 million, a 56% increase from €1,189 million in the previous year [12]. - Gross profit margin improved to 61% for the year ended December 31, 2021, up from 50% in 2020 [13]. - EBIT for the year was €460.4 million, representing a significant recovery from a loss of €5.4 million in 2020 [12]. - Net income for the year was €310.7 million, compared to a net loss of €16.2 million in the previous year, marking a substantial turnaround [12]. - Cash flow from operating activities was €460 million, while cash used in investing activities was €48 million [22]. Sustainability and Social Responsibility - The company focuses on sustainable development and social responsibility, which are increasingly important to consumers [9]. - The company communicated its sustainable growth strategy, focusing on three pillars: people, environment, and culture [11]. Corporate Governance - The board of directors consists of 11 members, including 5 executive directors, 1 non-executive director, and 5 independent non-executive directors [30]. - The board is responsible for the overall strategy and financial performance of the company, including sustainability strategies and major transactions [34]. - The board established a sustainability committee in February 2022 to address environmental, social, and governance (ESG) matters [44]. - The company has adopted written procedures regulating securities trading by directors and employees with insider information, with no violations reported in 2021 [29]. Risk Management and Internal Controls - The company has adopted procedures to identify, assess, and manage risks affecting its operations, particularly in response to the COVID-19 pandemic [62]. - The internal audit department provides independent reviews of the internal control and risk management systems, with regular updates to the risk assessment documents [62]. - No significant control deficiencies or failures were identified during the year 2021, indicating effective internal control and risk management systems [62]. Financial Position and Liabilities - As of December 31, 2021, net financial position showed a surplus of €142 million, an increase of €307 million compared to the previous reporting date [20]. - Total financial liabilities amounted to €680.6 million, up from €630.6 million in the previous year [20]. - The debt-to-equity ratio improved to -6.0% as of December 31, 2021, compared to 6.9% in the previous year [16]. - Cash and cash equivalents increased to €396.8 million from €103.3 million year-over-year [20]. Investments and Acquisitions - The acquisition of remaining stakes in two companies in Italy and Romania, along with the acquisition of Filati Biagioli spa, strengthened manufacturing activities [11]. - The company executed stock options to acquire the remaining 10% of Pelletteria Ennepì Srl and 20% of Hipic Prod Impex Srl, achieving full ownership of both companies [132]. - The company completed the acquisition of Filati Biagioli Modesto S.p.A. on June 22, 2021, enhancing its capabilities in cashmere and other fine yarns [133]. Financial Risks and Hedging - The company faces financial risks from currency and interest rate fluctuations due to its international operations [126]. - The company uses hedging contracts to manage risks related to currency and interest rates [126]. - The company has entered into interest rate swaps to hedge against interest rate fluctuations, with a notional amount of €31,167,000 at a fixed rate of 1.457% maturing in May 2030 [152]. Employee Compensation and Governance - The company's compensation policy aims to attract, reward, and retain employees, which is considered key to the group's business success [50]. - A long-term cash incentive plan has been adopted for executive directors and senior management, contingent on achieving economic targets over a three-year period [51]. - The Compensation Committee held three meetings in 2021 with a 100% attendance rate to review and recommend the total basic salary for the board of directors [49]. Financial Reporting and Compliance - Prada spa's financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) effective as of December 31, 2021 [85]. - The company has implemented new and revised IFRS standards effective from January 1, 2022, including IFRS 3 on business combinations and IAS 16 on property, plant, and equipment [88]. - The company recognizes a COVID-19 related rent concession of €5.9 million in the income statement, which is not significantly related to the revisions made in 2021 [87].

Financial Performance - Prada Group reported a significant increase in revenue, achieving €3.2 billion in 2021, representing a 41% growth compared to the previous year[1]. - Net sales for the year ended December 31, 2021, reached €3,316,620 thousand, a significant increase from €2,390,866 thousand in 2020, representing a growth of 38.7%[76]. - The net income attributable to the group for 2021 was €294,254 thousand, a recovery from a loss of €54,139 thousand in 2020[76]. - The operating income (EBIT) for the same period was €489,484 thousand, which is 14.5% of net sales, compared to only €20,061 thousand (0.8%) in 2020[77]. - Operating cash flow for the year was €750,723 thousand, significantly higher than €262,100 thousand in 2020, reflecting improved operational efficiency[77]. - The gross profit margin improved to 75.7% in 2021, up from 72.0% in 2020, indicating better cost management and pricing strategies[76]. - The financial surplus for 2021 was €237,653 thousand, a significant improvement from a loss of €311,357 thousand in 2020 and €405,544 thousand in 2019[78]. - The total equity attributable to the group shareholders increased to €3,113,894 thousand in 2021, up from €2,832,057 thousand in 2020[78]. - The company reported a basic earnings per share of €0.115 for 2021, recovering from a loss of €0.021 per share in 2020[77]. - The company plans to continue expanding its market presence and investing in new product development to drive future growth[76]. Market Expansion and Strategy - The company plans to expand its retail footprint, targeting a 10% increase in the number of stores globally over the next two years[1]. - Prada Group is exploring potential acquisitions to enhance its brand portfolio and market presence, with a focus on niche luxury brands[1]. - The company has expanded its retail presence in key markets such as Dubai, Paris, and Hong Kong, with 100% ownership in these locations[64]. - The company has a significant retail footprint in Asia, with operations in Vietnam, Taiwan, and South Korea, enhancing its market reach[64]. - Retail sales in the Asia-Pacific region increased by 30.1% compared to 2019 at constant exchange rates, with notable growth in mainland China, South Korea, and Taiwan[84]. - The company completed over 120 store renovations and set up 80 pop-up installations in 2021, enhancing store traffic and brand visibility[80]. Sustainability Initiatives - Prada is investing in sustainable practices, with a commitment to reduce carbon emissions by 30% by 2025[1]. - The company has established a sustainable development strategy with three pillars: people, environment, and culture, approved by the board on November 11, 2021[40]. - Prada has committed to achieving net-zero emissions by 2050, reflecting its long-term sustainability goals[47]. - The company plans to achieve a 42% reduction in Scope 3 emissions by 2029, also based on 2019 levels[47]. - Prada has installed 141 LEED certifications across various projects, enhancing its commitment to sustainable building practices[47]. - The company is transitioning nearly all virgin nylon to recycled nylon through its Re-Nylon initiative, showcasing its dedication to sustainability[49]. - Prada Group achieved a greenhouse gas reduction target of 29% by 2026 for Scope 1 and 2 emissions, based on 2019 levels[47]. Digital Transformation - Prada's e-commerce sales surged by 70%, reflecting a shift in consumer behavior towards online shopping during the pandemic[1]. - The company aims to enhance its digital marketing strategies, allocating 20% of its marketing budget to digital channels in 2022[1]. - Direct e-commerce sales grew by 61% since 2020 and more than fivefold since 2019, accounting for approximately 7% of total retail sales in 2021[84]. - The investment in digital communication channels yielded outstanding results, particularly in online brand engagement metrics[80]. - The company has joined the Aura consortium to enhance customer experience through blockchain technology, ensuring greater transparency and traceability[80]. Corporate Governance and Leadership - Paolo Zannoni was elected as Chairman of the Board on May 27, 2021, and has been an international advisor for Goldman Sachs since 2019[128]. - Miuccia Prada and Patrizio Bertelli serve as co-CEOs, with Miuccia also being the co-creative director of Prada and Miu Miu[129]. - The company emphasizes its commitment to maintaining strong investor relations and financial communication strategies[133]. - The board includes non-executive director Stefano Simontacchi, who has extensive experience in international tax and corporate law[135]. - The company has received multiple awards for its contributions to international fashion, highlighting its innovative vision[130]. Employee and Workforce Management - As of December 31, 2021, Prada Group employed 13,140 people from 107 countries, with women making up 62% of the workforce[41]. - The company emphasizes a performance-linked compensation and benefits system to ensure equality and attract skilled professionals[43]. - Prada Academy serves as a training center to share knowledge and skills, focusing on preserving classic craftsmanship and enhancing employee capabilities[42]. - The company has implemented a long-term plan for disability inclusion, hiring individuals with Down syndrome in its Italian stores[41]. Risk Management - The group faces foreign exchange risks due to its extensive international presence and has established derivative contracts to hedge these risks[112]. - Interest rate risk is managed through derivative instruments, such as interest rate swaps, to convert floating-rate debt into fixed-rate debt[113]. - Credit risk primarily involves trade receivables from wholesale channels, managed through business and financial strategies based on customer creditworthiness and insurance contracts[106]. - The company has enhanced its information system security in response to rising cyberattack risks reported by EU financial market regulators[115]. Cultural and Community Engagement - The Prada Foundation has presented 24 exhibitions in Milan, honoring significant global artists and hosting various cultural events[54]. - The company completed the restoration of the Rongzhai historical landmark in Shanghai in 2017, showcasing its commitment to cultural heritage[53]. - Prada has established a long-term partnership with UNESCO for the "Sea Beyond" project, promoting marine conservation awareness among students[51]. - The Prada Foundation launched the "Human Brains" project, aimed at increasing public interest in neuroscience through exhibitions and discussions, running until 2022[56]. Compliance and Ethical Practices - The company emphasizes compliance with international and local laws, having established an industrial compliance committee in 2010 to oversee product manufacturing and distribution[164]. - The company’s commitment to ethical practices includes ensuring suppliers adhere to high standards and respect employee rights, such as fair working conditions and environmental protection[169]. - Prada's tax strategy focuses on preventing tax risks and ensuring tax stability through ongoing dialogue with tax authorities in operating countries[109].

Financial Data and Key Metrics Changes - Total net revenues for the full year reached €3.5 billion, up 41% at constant exchange rate year-on-year and up 8% on a two-year stack [24] - EBIT reached €489 million for the full year, representing 14.5% of sales, with a significant increase in margins in the second half at 17.4% of sales [25] - Net profit stood at €294 million, 8.8% of total revenue, with operating cash flow for the full year reaching €751 million [26] - The net financial position improved from negative €311 million in December 2020 to positive €238 million at the end of December 2021 [41][42] Business Line Data and Key Metrics Changes - Retail revenues reached €2.9 billion, marking a 40% increase compared to 2020 and a 15% increase compared to 2019 [25] - Online sales increased significantly, growing 5x on a two-year stack and representing around 7% of retail sales [28] - Wholesale was down 29% at constant exchange rate compared with 2019, consistent with the strategy to rationalize the wholesale channel [28] Market Data and Key Metrics Changes - Retail sales in Asia-Pacific grew by 30% compared to the same period in 2019, with outstanding performance in Korea and China [31] - The Americas saw triple-digit sales growth versus 2020 and up 69% on a two-year stack [32] - Retail sales in Europe improved significantly in the second half of the year, supported by strong local demand following store reopenings [31] Company Strategy and Development Direction - The company aims to put customers at the core of its strategy, focusing on younger generations and investing in product quality and uniqueness [12] - Strengthening direct distribution is central to the group's strategy, with 80 pop-ups implemented and 120 store renovations completed [10] - The ESG agenda is a critical strength for long-term growth, with a focus on governance, climate strategy, materials, and diversity [21] Management's Comments on Operating Environment and Future Outlook - The geopolitical and macroeconomic outlook has worsened, increasing volatility, and the company is closely monitoring the business environment [45] - Despite uncertainties, the beginning of 2022 has shown promising results, consolidating confidence in achieving medium-term targets [13] - The company acknowledges the impact of the war in Ukraine and the COVID situation in China on the global economy [51][62] Other Important Information - The company has proposed a dividend distribution of €179 million, representing a payout ratio of 60% [42] - The retail channel remains a priority, now representing 88% of total sales [27] Q&A Session Summary Question: Strong start to 2022 and impact of COVID in China - Management indicated a strong start to 2022, with year-over-year growth around 20%, but acknowledged the impact of COVID lockdowns in China [48][51] Question: Price increases in 2022 - Price increases were implemented in January, with ongoing monitoring of raw material and transport costs to adjust pricing strategies [50] Question: EBIT margin outlook - The EBIT margin in H2 was significantly higher due to market recovery, and management expects to maintain higher EBITDA levels in stable conditions [49] Question: Relationship with Yoox Net-a-Porter - Management refrained from commenting on potential investments in Yoox Net-a-Porter due to current uncertainties [55] Question: Gross margin target - The company confirmed a target of 78% gross margin, driven by operational efficiencies and higher-value product offerings [56] Question: Operations in Russia - All stores in Russia are directly operated, and the company has completely halted operations there due to the geopolitical situation [57] Question: Performance of leather goods - Leather goods showed positive growth, but management noted that ready-to-wear performed exceptionally well [66] Question: U.S. market plans and inflation impact - The U.S. market remains under-penetrated, with plans for additional store openings, and the company believes it can absorb inflation through pricing power [65][66] Question: New product categories and customer demographics - New product categories have attracted both new and existing customers, with the U.S. showing the highest penetration of younger consumers [72][81]

Financial Performance - PRADA Group reported a significant increase in revenue, achieving €1.5 billion for the first half of 2021, representing a 60% year-over-year growth[2]. - The company reported a net profit of €300 million for the first half of 2021, a significant improvement compared to a loss in the same period last year[2]. - The net income attributable to the group for the six months ended June 30, 2021, was €97,243 thousand, compared to a loss of €180,332 thousand in the previous year[14]. - For the six months ended June 30, 2021, the EBIT was €165.9 million, representing 11.1% of net revenue, a significant improvement from a loss of €195.8 million (-20.9%) in the same period of 2020[54]. - The company reported total comprehensive income of €130,608 thousand for the six months ended June 30, 2021, compared to a loss of €(136,855) thousand for the full year ended December 31, 2020[89]. - The company reported a significant reduction in labor costs to €7 million from €33.8 million in the previous year, reflecting operational efficiency[55]. - The company reported a financial loss of €101,814 thousand for the first half of 2021, an improvement from a loss of €311,357 thousand in the same period of 2020[15]. Sales and Market Performance - The company noted a strong recovery in retail sales, with a 70% increase in comparable store sales compared to the same period in 2020[2]. - PRADA Group's online sales surged by 100%, contributing to 20% of total sales, highlighting the shift towards digital channels[2]. - Retail sales for Prada Group increased by 60.3% in the first half of 2021 compared to the same period in 2020, and by 8.4% compared to 2019, with e-commerce sales reaching nearly 7% of total retail sales[20]. - In the Asia-Pacific region, retail sales rose by 64.9% compared to the same period in 2020, and by 34.9% compared to 2019, with significant growth in mainland China (+77%), Taiwan (+74%), and South Korea (+108%)[22]. - The Americas market saw a robust recovery with retail sales increasing by 163.4% compared to the first half of 2020, and by 52.5% compared to 2019[22]. Operational Strategy - The company plans to expand its retail footprint, targeting an increase of 10% in the number of stores globally by the end of 2022[2]. - PRADA Group is exploring potential acquisitions to enhance its brand portfolio and market presence, particularly in the luxury segment[2]. - The company is actively expanding its retail footprint while also managing underperforming assets through liquidation strategies[8]. - The company plans to continue focusing on product design and development, with costs amounting to €63,736 thousand, representing 4.2% of net sales[13]. - The company is investing in new product lines, with a focus on sustainable materials, aiming for 50% of its collections to be made from sustainable sources by 2025[2]. Financial Health and Liquidity - The total equity of the group as of June 30, 2021, was €2,881,081 thousand, an increase from €2,832,057 thousand at the end of 2020[15]. - The company has secured two ESG-related loans: a €90 million bilateral long-term loan and a €400 million revolving credit facility, enhancing financial flexibility[18]. - The net cash flow from operating activities was €315,602 thousand, a significant turnaround from a negative cash flow of €26,455 thousand in 2020[14]. - Cash and cash equivalents increased to €604.7 million from €442.4 million at the end of 2020[34]. - The company has sufficient liquidity, with available cash and credit lines, to meet operational, investment, debt repayment, and dividend payment needs[45]. Cost Management and Efficiency - Gross profit margin improved to 74.3% in 2021, up from 70.4% in 2020, indicating better cost management and pricing strategies[13]. - The cost of sales was €651,139 thousand, which accounted for 43.4% of net sales, compared to 65.2% in the previous year, indicating improved efficiency[13]. - The total operating expenses amounted to €949,081 thousand, which is 63.2% of net sales, down from 91.3% in the previous year[13]. - Operating income for the same period was €165,904 thousand, with an EBIT margin of 11.1%, a significant recovery from a loss of €195,796 thousand in 2020[14]. Corporate Governance and Compliance - The board of directors consists of nine members, including the chairman Paolo Zannoni and CEO Miuccia Prada Bianchi, with a term lasting until the approval of the financial statements for the year ending December 31, 2023[63]. - The audit committee held four meetings during the review period, with a 100% attendance rate, focusing on the audit plan, internal controls, and financial reporting matters[66]. - The company has adopted written procedures regulating securities trading by directors, ensuring compliance with the standards set out in the Listing Rules[75]. - The group has implemented a centralized governance model to manage regulatory compliance risks arising from complex global frameworks[47]. Sustainability and Social Responsibility - The company has established a training program to support young talents from diverse backgrounds in the fashion industry, emphasizing sustainability and inclusivity[17]. - PRADA Group is investing in new product lines, with a focus on sustainable materials, aiming for 50% of its collections to be made from sustainable sources by 2025[2]. - The group believes its credit risk primarily involves trade receivables and current assets generated from wholesale channels[44]. Future Outlook - The company has set a guidance for full-year revenue growth of 25% to 30%, reflecting confidence in continued market recovery[2]. - Management expressed confidence in maintaining strong sales momentum in the second half of the year, despite uncertainties in the market[59]. - Future guidance suggests a cautious outlook, with an emphasis on managing costs while pursuing growth opportunities in new markets[199].

Financial Performance - Prada Group reported a significant decline in revenue for 2020, with total sales dropping by 24% to €2.42 billion compared to the previous year[1]. - The group's net profit for 2020 was €200 million, a decrease of 70% year-on-year, reflecting the impact of the COVID-19 pandemic on luxury retail[1]. - Net sales for the year ended December 31, 2020, were €2,390.9 million, a decrease from €3,183.3 million in 2019, representing a decline of 25.0%[70]. - EBIT for the year was €20.1 million, significantly down from €306.8 million in 2019, resulting in an EBIT margin of 0.8% compared to 9.5% the previous year[71]. - The net loss for the group was €54.1 million, compared to a profit of €255.8 million in 2019, marking a substantial decline[71]. - Operating cash flow for the year was €262.1 million, down from €362.4 million in 2019, indicating a decrease in cash generation from operations[71]. - The group’s equity attributable to shareholders was €2,832.1 million, down from €2,967.2 million in 2019, showing a decline in shareholder equity[72]. - The company incurred €115.8 million in costs related to store closures during lockdowns, impacting overall financial performance[70]. - The net financial position showed a loss of €311.4 million, an improvement from a loss of €405.5 million in 2019, indicating better financial management[72]. - Total operating expenses amounted to €1,723.3 million, a decrease of €289.5 million compared to the previous year, largely due to rent reductions and government subsidies[84]. E-commerce and Digital Strategy - E-commerce sales surged by 77% in 2020, accounting for 20% of total sales, indicating a shift in consumer purchasing behavior towards online platforms[1]. - The company has implemented new digital marketing strategies to enhance customer engagement and drive sales through online channels[1]. - Significant investments have been made in digital development, strengthening partnerships with top online retailers[42]. - Direct e-commerce sales tripled compared to 2019, indicating a strong shift towards online shopping during the pandemic[79]. - The company redesigned prada.com and miumiu.com for enhanced customer experience[75]. Market Expansion and Retail Strategy - Prada Group plans to expand its retail network, with a focus on opening new stores in key markets, particularly in Asia and the Americas, to enhance brand presence[1]. - The company has expanded its distribution network to 633 directly operated stores in prime locations, enhancing brand visibility and sales performance[42]. - The company closed 20 stores and opened 12, resulting in a total of 633 stores as of December 31, 2020, with 140 stores still closed due to the pandemic[79]. - Retail channel sales accounted for 88.5% of total net sales in 2020, up from 82.8% in 2019[79]. - The Asia-Pacific market showed resilience with retail sales net amounting to a decrease of only 1.1% compared to 2019, while the second half of 2020 saw a 19% increase compared to the same period in 2019[80]. Sustainability and Corporate Responsibility - The company is investing in sustainable production practices, with plans to open a new leather goods factory in Tuscany and refurbish five existing facilities to meet environmental standards[1]. - Prada Group's energy efficiency action plan includes the construction of 10 large photovoltaic power stations and the replacement of all air conditioning and cooling systems with the latest technology[48]. - The company has committed to a fur-free policy and launched the Prada Re-Nylon initiative, aiming to replace virgin nylon with recycled nylon across most of its clothing and leather goods[51]. - Prada Group achieved 58 LEED certifications for its stores and factories by December 31, 2020, with 20 new certifications added in 2020[48]. - The company participated in the Fashion Pact, collaborating with over 60 leading fashion and textile companies to enhance environmental sustainability commitments[51]. Innovation and Product Development - Prada Group is set to launch new product lines, including a collection of sustainable fashion items, to align with growing consumer demand for eco-friendly products[1]. - The company continues to focus on innovation in design and technology, with ongoing research and development efforts to create unique luxury products[1]. - Research and development costs for design and product development amounted to €102.2 million for the year[110]. Leadership and Governance - Miuccia Prada and Patrizio Bertelli are co-founders and current CEOs of the company, with Miuccia serving as the chairperson since November 2003[114]. - The company has a strong governance structure with various committees, including audit and remuneration committees[118]. - The board includes members with significant expertise in international tax, private equity, and mergers and acquisitions[116]. - The company has maintained a consistent leadership team with re-elections occurring in 2018 for key positions[114][116]. - The management team has extensive experience in luxury retail and brand management, enhancing the company's operational capabilities[126]. Employee and Workforce Management - As of December 31, 2020, Prada Group employed 12,858 people from 104 countries, with women making up 62% of the workforce[45]. - The average number of employees decreased to 13,331 from 13,779 in the previous year, reflecting a reduction in workforce[71]. - The company emphasizes diversity and inclusion, establishing a cultural diversity advisory committee in 2019 to enhance management's focus on social sustainability[45]. - Prada Academy serves as the training center to cultivate talent and ensure the preservation of craftsmanship knowledge and skills[46]. Financial Management and Risk - The company has established a tax risk management system, participating in the OECD's International Compliance Assurance Program (ICAP) to mitigate potential tax risks[102]. - The group has achieved "Authorized Economic Operator" (AEO) status, enhancing operational efficiency and reducing average transfer times for raw materials and finished goods[103]. - The company has implemented measures to protect data privacy and ensure compliance with applicable laws and regulations, minimizing data processing risks[104]. - The group actively protects its brand and intellectual property through legal registrations and collaborations with customs and law enforcement agencies[97]. - The company has established a systematic communication channel with tax authorities to reduce uncertainties related to tax compliance[102].