PRADA(PRDSY) - 2021 Q4 - Earnings Call Transcript

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]