Financial Data and Key Metrics - Net revenues reached €2.55 billion, up 17% YoY at constant FX, with a negative FX impact of 330 basis points leading to a 14% increase at current exchange rates [43] - Retail sales grew 18% YoY to €2.26 billion at constant FX, with EBIT reaching €575 million, a 26% increase YoY, and EBIT margin expanding to 22.6% [43][3] - Net income increased by 26% YoY to €383 million, while CapEx for H1 2024 was €169 million, allocated to retail, IT, and industrial infrastructure [3] - Operating costs increased by 14% at constant FX, driven by client-facing initiatives and digital/IT investments, with G&A costs rising from 6.6% to 7% of revenue [2] Business Line Performance - Retail sales grew 18% YoY, driven by full-price like-for-like volumes, with wholesale up 8% and royalties increasing 28% [36] - Prada retail sales grew 6% YoY, with a 5% increase in Q2 despite tougher comparisons in Asia Pacific [110] - Miu Miu retail sales surged 93% YoY, contributing 23% of group retail sales, up from 14% in H1 2023 [87] - Church's also performed well, with a 15% increase in retail sales [87] Regional Performance - Asia Pacific retail sales grew 12% in H1, with Q2 up 8% despite tougher comparisons [1] - Europe saw an 18% increase in retail sales, with Q2 growth of 19% driven by strong local demand and tourism [1] - Americas retail sales grew 7%, with Q2 showing a sequential improvement of 9% [1] - Japan was the best-performing region, with retail sales up 55% in H1 and accelerating to 65% in Q2 [1] - Middle East retail sales grew 20% in H1, with acceleration in Q2 [1] Strategy and Industry Competition - The company reiterated its commitment to delivering sustainable, above-market growth, focusing on brand investment and agility in a challenging market environment [5] - Prada and Miu Miu are positioned to capture unique identities, with strong traction in ready-to-wear, footwear, and leather goods [85][87] - The company is investing in vertical integration and manufacturing capabilities, with €50 million allocated to industrial initiatives in H1 2024 [3] Management Commentary on Market Conditions - Management noted a more complicated environment in China, with easier trends in other regions, and emphasized vigilance and agility in navigating market challenges [7][15] - The company expects operating leverage to improve in H2, with moderated OpEx growth and continued focus on cost control [22][100] Other Key Information - The group maintained a solid balance sheet with a net cash position of €265 million as of June 2024 [37] - ESG initiatives progressed, with 80% of raw material suppliers engaged in sustainability programs and 70% of leather procurement covered by traceability systems [86] Q&A Summary Question: Demand in China and offsetting with Chinese spending abroad - Management noted no drastic changes in trends in July, with China becoming more complicated while other regions eased [7] Question: Miu Miu's operating margin compared to Prada - Miu Miu's profitability is improving significantly due to productivity gains, but reinvestment is needed to sustain growth [58] Question: Retail footprint and store openings - The company closed 10 Prada stores and 4 franchise stores in H1, with plans for marginal growth in store openings in 2025 [18][44] Question: Pricing strategy - Price increases in H1 were in the low single digits, with mid-single-digit increases expected for the full year [20] Question: OpEx leverage and EBIT margin expansion - Management expects more visible operating leverage in H2, with moderated OpEx growth and improved revenue growth [22] Question: Regional performance in Europe and Japan - Europe saw low double-digit growth in Q2, while Japan maintained strong performance with 65% local and 35% tourist sales [72] Question: Gross margin outlook for H2 - No major changes in industrial gross margins are expected, despite some FX headwinds [29] Question: Online business penetration - Online penetration is around 8-9%, with higher rates in the US, but the focus is on full potential rather than specific penetration levels [70] Question: Category performance and jewelry launches - Ready-to-wear and footwear showed strong traction, with leather goods also performing well [123] Question: Synergies between Prada and Miu Miu - The two brands are increasingly independent, with 80% of operations now separate, but Prada supports most of the shared infrastructure costs [127]
PRADA(PRDSY) - 2024 Q2 - Earnings Call Transcript