Prada S.p.A. (1913) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Prada Group 2026 Half Year Results Conference Call and webcast. [Operator Instructions] Please also note that today's conference is being recorded. I would now like to turn the conference over to Mr. Andrea Bonini, Group CFO. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining Prada Group's First Half 2026 Results Call. This is Andrea Bonini, Group Chief Financial Officer, and I'm delighted to be with you again. I'm joined by Mr. Andrea Guerra and Mr. Lorenzo Bertelli. The agenda for today's session is on Page 4, and as always, it will be followed by Q&A. As a reminder, during today's call, we may discuss forward-looking statements, which are subject to risks, uncertainties and factors beyond our control that could cause the actual outcome and returns to differ materially from such statements. Please refer to the disclaimers included on Slide 2 of our presentation. With that, I will hand over to Mr. Guerra.

Hello, and welcome from my side as well. With the end of 2025, for sure, we have completed a fantastic cycle of constant growth and expansion for our Prada Group. I think we have been all very pleased for this long journey. And I think that we also paved and created the foundations for the new cycle. In 2026, as we already talked about it earlier in the year, we are building a new cycle and a new cycle, which is pretty simple and is made of a constant solid growth for Prada, a normalized but substantial growth for Miu Miu and a new brand and creative journey through important milestones for Versace. I think that these are very important objectives. And also very simple ways of saying that we want to build again this new cycle of growth on our three main brands. At the end of the first semester, we have been able to accomplish our fundamental objectives on all three brands without Church's included. So we are happy of these first 6 months and ready for the next. In details, this means that the Group overall growth at constant FX first half has been 16% organic without Versace and constant FX at 5% with an acceleration in Q2 at plus 7% on a 6% of a year ago. Going to the brands, Prada, solid growth and maybe something more. Since January, we have seen an acceleration on all important KPIs regarding new clients, regional spread, average price. We have been dynamic. We've offered a number of different projects to the market that have been appreciated. We have grown all categories and always keeping in mind that Middle East is reducing our 6% growth in Q2 by 100 bps. Miu Miu, we had to normalize. We normalized. We're yet today normalizing, but with great desirability and love for the brand. This is something that it's there and will continue to be there. And this will remain our North Star without shortcuts. We had to adapt mentally to a new way of doing in a new world of normalized growth. Took some weeks, maybe some months between the end of the year and beginning of the year. I think that today, we are ready and committed. We delivered a positive 3% on a 40% of a year ago. On top of this, I think that we are also well equipped for the second half with a complete new collection of leather goods that I think can really help us in maintaining the rhythm. Middle East impact in Q2 has been something around 300 basis points. So I would say that the Miu Miu effect from the Middle East has been quite big. Versace, first 6 months of the year, in line with expectations, top line and bottom line. Having said so, this means that we work hard on many different things in these first 6 months, organization, synergies, costs, journey, commercial milestones. It's a long journey, but I think that we started it. Since July 1, Pieter Mulier is on board, and we are extremely happy about it. Now we have another tough 6 months with no show. And we need to fight. We need to get all the right opportunities and not burn any of them. We are all working on it. So even for the Versace brand, these first 6 months have been in line with our desires. Thank you. Now Lorenzo, you can take it from here, and I will be back for our closing remarks.

Thank you, Andrea, and good afternoon. The first 6 months of the year have shown once again that Prada is much more than a fashion brand. It's a creative platform where fashion, culture, innovation continuously reinforce one another. Everything starts with creativity. Our fashion shows and campaign continue to express a distinctive point of view on contemporary society while exploring new artistic and cultural territories. Prada Nylon, days of summer and the Spring/Summer '26 campaign were certainly among the highlights of this first half of the year. Beyond fashion initiatives such as Prada Mode and Prada Frames foster dialogue across disciplines and creative communities, while the presentation in New York of the latest chapter of our partnership with Axiom Space further enforces Prada's unique positioning and the intersection of design, advanced production development and high-performance material. We also continue to elevate the brand experience through landmark destination. The announcement of Prada Galleria project in Milan, which will officially unveil in September, reflects our ambition to create immersive spaces where hospitality, culture and retail come together to express the Prada universe in a richer and more engaging ways. Prada's ability to connect product, culture and experience remains one of the brand's defining strengths. Looking at Miu Miu now. Throughout the semester, fashion show campaign and special projects such as Miu Miu Upcycled continue to shape a distinctive vision of feminity, while signature culture initiatives including Summer Reads, Women’s Tales, and Dirty Blizzard further strengthen Miu Miu’s unique voice in contemporary culture. For the reopening of Ginza flagship in Tokyo, Miu Miu debuted with Chat Club and a celebration of a brand's long-standing connection with Japan through a unique cultural format promoting creative exchange. Moreover, collaborations such as the one with Tennis player Coco Gauff continue to engage new communities, extending the brand's relevance well beyond fashion. Miu Miu allure continues to lie in its ability to evolve and expand its reach, attracting new audiences without ever compromising on its free spirited identity. Moving now to a brief update on Versace. As you remember, we have discussed in more detail the strategic priorities during our call in March. Those objectives are confirmed and so is the action timeline. During the first 6 months of the year, the brand has performed in line with expectation as we set the basis for a gradual improvement of the quality of top line. Retail execution continued to be a key area of focus alongside the rationalization of the network with selective closures of nonstrategic stores. Most importantly, the arrival of Pieter Mulier as new Creative Director marked the beginning of the brand's aesthetic repositioning. We welcome Pieter's visionary talent and we wish him good luck with his exciting journey. In regards to our ESG target, over the past 6 months, we have continued to make tangible progress across our key sustainable priorities. We advanced our transition to lower impact raw materials, achieved ZDHC accelerator starting recognition of our commitment to responsible chemical management, strengthened the collaboration to accelerate supply chain decarbonization and further embrace circularity through the last latest Re-Nylon collection. At the same time, we continue to invest in our people by advancing our D&I agenda and promoting gender equity, expanding trade initiatives and launching a global no-violence awareness journey to foster a culture of respect. Finally, through SEA BEYOND and our educational partnership, we expanded our positive impact by engaging students and children in environmental education, constantly promoting initiatives aimed to inspiring awareness and empowering future generation. I will now leave it to Andrea Bonini to walk you through the financial review section. Thank you.

Thank you, Lorenzo. The group reported net revenues in excess of EUR 3 billion, up 16% versus H1 '25 at constant FX. On an organic basis, revenues grew 5% year-on-year with Q2 accelerating to plus 7%. This performance marks the 22nd consecutive quarter of organic growth at group level. Exchange rates had a negative impact of 490 points on revenues and the increase at current exchange rates is therefore, plus 11%. Retail sales for the period totaled EUR 2.6 billion, up 3% organic versus H1 '25 at constant FX against double-digit comps of plus 10% last year. EBIT adjusted was steady year-on-year on an organic basis as greater marketing investments were offset by efficiencies and cost discipline in other areas, including corporate, retail and industrial. Including Versace and the FX impact, EBIT adjusted reached EUR 530 million with a margin of 17.4%. Net cash flow improved year-on-year, even in reported terms, and we closed the semester with a net debt position of EUR 693 million. Moving to Slide 14, net revenues by channel. The group recorded net revenues of EUR 3 billion in the first half of the year, up 16% at constant FX, plus 5% organic. At retail level, sales reached EUR 2.63 billion, up 12% at constant FX, plus 3% organic against plus 10% in H1 '25. The second quarter saw an acceleration to plus 5% from plus 1% in Q1 despite the greater impact of the conflict in Middle East. The region had a negative impact of approximately 1.5 percentage points on retail organic performance for the semester. Wholesale was up 40% over the semester, plus 20% organic, sustained by both independent wholesale and duty-free. You may remember, H1 '25 was impacted by some negative phasing effects on deliveries and year-on-year growth benefits of that this year, but our selective strategy remains unchanged. Trends were positive on royalties, up 73% at constant FX, plus 12% organic, supported by both eyewear and beauty. Turning to next slide, retail sales by brand. Prada reported retail sales up 3% in H1, strengthening to plus 6% in the second quarter, a very positive performance underpinned by like-for-like full price sales. The improvement was broad-based across regions with notable strength in Americas, Japan and APAC. Miu Miu remained highly desirable, continuing to show positive trends. Retail sales were up 3% in the semester on plus 49% in H1 '25, with Q2 performance in line with Q1. The Middle East had a negative impact of 3 percentage points on Miu Miu's performance in the 6 months as the brand has higher than group's average exposure to the region. As for Versace, we are pleased with the performance, which was in line with expectations with the brand contributing EUR 219 million to retail sales in H1 '26. Moving to the next slide, retail sales by geography. Asia Pacific continued to show strength, growing at plus 15% at constant FX, plus 6% organic. Prada made further progress in Q2, supported by solid execution and positive trends across the region. Miu Miu's growth remained robust throughout the period. Performance in Europe was up 5%, down 4% organic, with Q2 showing signs of improvement, supported by a recovery in both tourist spending and local demand. The Americas remained buoyant, up 37% constant FX, plus 17% organic, with Q2 accelerating on higher local demand. Both Prada and Miu Miu continued to benefit from strengthened organizations and investments. Positive performance in Japan, up 6% in H1, plus 2% organic, with Q2 showing improving trends supported by solid local consumption and increased traveler demand. Finally, the prolongment of the conflict continued to weigh on Middle East with the region down 24% in the semester. Local demand remained relatively resilient over the period, improving quarter-on-quarter. Turning to next slide. Underlying profitability was steady year-on-year, measured on an organic basis. Efficiencies, cost discipline and operating leverage helped offsetting higher marketing investments in part due to phasing. Factoring in Versace and FX, EBIT adjusted margin landed at 17.4% or EUR 530 million. Of the roughly 500 basis points of dilution versus the organic EBIT adjusted margin, 2/3 come from Versace and 1/3 from FX. Moving to Slide 18. CapEx for the first half of 2026 was EUR 226 million. In retail, we balanced capital allocation across new openings, renovations and relocations, and we also progressed with the planned store closures. Strengthening the industrial platform and advancing the digital transformation journey continued to be the other key area of focus. As a reminder, we expect CapEx as a percentage of sales to start reducing from the current fiscal year. Moving to the next slide. Net working capital reached EUR 956 million, including Versace and remained stable at 15% of net sales in organic terms, reflected continued effective working capital management. Lastly, the group retains a solid balance sheet, closing the semester with a net debt position of EUR 693 million after a CapEx cash out of EUR 247 million and dividend payments of circa EUR 400 million. With that, I will hand over to Andrea Guerra for his closing remarks.

Closing remarks. Our storyline for this year is very clear, and I would say also simple, and I will stress it again, and I will try to describe a few things that we're doing. And I really think that these are vital going forward. So on one side, top-tier consumers drive the market and they are even stronger than before. And I think that we have been delivering and we will continue to deliver and even this huge epicenter of Milan Galleria will help on this, I think that we are ready to pamper and service these consumers the best possible. On the other side, new ideas, new projects need to happen to attract to the industry younger clients. I think that this is one of the biggest challenge of our industry. And I also think that Miu Miu first, Prada second, we are ready for this. Third, when we talk about brands, credibility and desirability are the two mantras. I think that being credible in this world is half of the job. Being desirable in this world is the other half of the job. The equation is clear. And I think that with our creativity, our creative directors, our way of managing our brands, our long tenure in managing our brands, I think that we are in one of the best position to satisfy this. There is no obvious growth trends across the world. There are some in some countries, but not all across the world. And I think that even if there is no obvious growth patterns in some areas of the world, there is still huge opportunities for us. This is what we're doing. I said it at the beginning, what are the objectives for Prada, what are the objectives for Miu Miu and what are the objectives for Versace, and we will continue working around them. [Foreign Language], we can now switch to your questions and comments.

[Operator Instructions] Are now going to proceed with our first question. The questions come from the line of Luca Solca from Bernstein.

My first question is about retail space productivity. You have developed Miu Miu very significantly in the past few years, but you also increased the retail network. Could you give us a sense of how the sales per square foot would compare across the three main brands that you have, Prada, Miu Miu and Versace?

You're asking obviously a question that we will not answer, but I will give you some flavor around it. So I think Miu Miu is top of the industry. Considering the size and considering basically in 5 years, the growth we had. And at the end, we basically enlarged the network by 10 stores. So I think it's top of the industry. As we all know, Prada had to recover. So we knew it, I think, has been one of the first topics we discussed 4 years ago. And if you look at Prada since 2021, '22, '23, '24, '25, '26, everything you have seen is basically -- not basically, it's like-for-like. So did we improve? Yes, we improved. Are we with the best? No, I think there is yet a journey to be done. On Versace, I wouldn't begin today the conversation. Next year, we can begin the conversation.

Of course, Andrea. My second question is about Miu Miu. Some of your peers at some point with smaller brands at some point, very significant success, except they couldn't maintain it. This was on the back of the brand becoming very hot or product becoming very popular or whatever. I could name names, but I will abstain from that. What safeguards and what actions are you planning in order to avoid this sort of marked normalization turns into fading? What can you potentially feel in order to maintain this level and continue to grow as you stated your ambition, the Miu Miu remit?

So first of all, I think there is a mathematical thing to be taken in consideration that is we have grown very significantly from a low baseline. So yes, we have grown significantly. We have reached a significant level of revenue just shy of the EUR 2 billion, but we were starting from EUR 450 million 5 years ago. So it means that those percentage growth were there. I think that one basic thing happened. We tried our best not to take shortcuts and to keep things as simple as we could. What do I mean by that? 6 years ago, 5 years ago, we had -- maybe I go wrong by some units, 155 stores, and today, we've got 165 stores. So we didn't follow success and opened wherever people were offering wherever to open. And we did not even increase significantly the square footage of our stores. We didn't enter new categories that were not really part of our core brand. You know how many times people have been asking us to enter men, to enter licenses or to enter whatever you can think about. When you have success, the only thing you should be able to say is no to basically 90% of the proposal that are done to you. So this is what we are trying to do. And believe me, if you were asking me, let me include Middle East in the equation. Andrea, would you sign to be at plus 5%, plus 6% on Miu Miu in 2026 on a plus 40% of 2025, I would have signed.

Understood. Lastly, if I may ask another question. This has to do with pricing. We have seen a significant like-for-like price inflation in soft luxury. And when we look at the growth, again, in the broader market, looking at your peers, we see that those that are resisting sort of adjusting their mix and coming to engage with the middle class aspirational consumers other ones growing the least. So I wonder, you have shown remarkable ability to increase prices. But at the same time, we are facing a polarized market with the top spenders spending on the front foot and the aspirational consumers struggling. What is your thinking and your actions or your plans about maintaining the engagement of aspirational middle class consumers who are, nevertheless, 55% or so of the total market?

Let me put it this way. The biggest opportunity -- we're talking about Prada now. The biggest opportunity we have is with top spenders. I mean if you look to our price range, we have always been pretty shallow with our price range. We can discuss our entry price. I'm pretty comfortable in mid-2026 with most of our new entry prices in many different product categories from ready-to-wear to leather goods. And the real challenge we have, the real opportunity is to satisfy an unbelievable demand from top spenders Prada has that's somehow we have been in our history, reluctant to satisfy. I think that we are proving ourselves that we can play in different segments. I don't want to talk about have mass price points, okay? But I'm ready to talk about really keeping our entry price stable and being able to enlarge the price range. This is what we're trying to do today because the top spenders are there, they're healthy, they are wealthy, and we need to gain our fair share there.

We are now going to take our next question -- and the questions come from the line of Anne-Laure Bismuth from HSBC.

I have two questions, please. The first one is on the Prada brand. So would it be possible to have an idea of what was the split of the growth between volume, price and mix and which category did perform best in Q2? And I assume the Q2 already reflects the good reception of the new bag lines that have been launched recently?

So you mixed a message I was giving the new bag line was Miu Miu was not Prada.

Yes, you have also launched a new handbag line for the Prada brand recently.

I mean, I was referring to Miu Miu, but obviously, we have been launching new Prada lines on bags during this first semester, yes. So I would say we were slightly positive on volume, and then it was more a mix effect rather than a price effect. In terms of categories, we were on all categories positive, men and women. On shoes, we were very shy negative.

Okay. And my second question is regarding the marketing spending, which was -- so the marketing to sales ratio was a bit more elevated in H1. Can you remind me what was in Q2? And should we expect the marketing to sales ratio that is broadly similar to last year for the full year?

Hi, I am Andrea Bonini, no change in marketing vis-a-vis what we said before in the sense that, I mean, we would expect it to be the incidence at the end of the year in line with last year or maybe slightly above that. And so yes, in the first half, there was a bit of a phasing effect, but no changes otherwise. Any other question from you.

We are now going to proceed with our next question. And the questions come from the line of Erwan Rambourg from Goldman Sachs.

I hope you can hear me. I'd like to squeeze in three, if I can. Erwan Rambourg from Goldman Sachs. So first, on Versace, now that you run the brand, I don't know if you can share maybe some positive or negative surprises since you took over the management of that. And linked to Versace, I think Andrea Bonini, you mentioned that dilution in the EBIT margin in H1 was about 2/3 of the 520 basis points, so about 350 basis points. What do you envisage the dilution from the integration to be in H2, please?

So you take your first part of the question is Lorenzo speaking. So negative surprise, no, we find out what we were expecting during the period of the acquisition. I would say positive, the people, the environment, everybody is super engaged. There is a good energy, nice energy, especially from -- also especially when -- from July, Pieter joined the group. So there is a lot of excitement and positive energy. And so this is the positive. Other than that, I would say no negative surprise, and that's it. Andrea?

Not significantly different for full year versus H1.

Okay. Meaning 350 basis points of dilution possible?

Yes, thereabouts.

Okay. Okay. So my second question is on -- so it's obviously quite surprising to see the Prada brand growing at a faster pace than Miu Miu this quarter. But obviously, we know what the base is, so it doesn't mean much. But Prada is growing at a faster pace very clearly than the market. So I'm wondering what are you doing right? And how can this market share gain momentum sustain?

So obviously, the growth of Miu Miu has been very visible. It's now 5 years that Prada is growing above the market. So -- and again, a repeat like-for-like. So I think it's a question of positioning. It's a question of credibility. And I think even a little bit proactivity to the market with ideas, projects and things that can allow us to engage different segments of consumers. I mean, I think this is what we have been able to do so far. Obviously, now it's -- we need to go forward. We need to keep it on, and we need to continue to fight.

Okay. Great. And then maybe last short question. And maybe I missed this, I'm sorry, during the presentation, but wholesale business underlying is growing 20%. Is there a one-off in there? And how do you think about sustainable growth in that channel?

There I mentioned it because it was -- well, more than this year was last year with a bit of a one-off -- negative one-off in the sense that it was phasing with some deliveries more delayed, and therefore, we benefit of that this year. So growth year-on-year is higher, but no changes in terms of underlying strategy and therefore, also expectation year-end.

How much would you imagine the channel to grow on a full year basis?

You look at the past couple of years and the approach remains selective.

We are now going to proceed with the next question. And the questions come from the line of Oriana Cardani from Intesa Sanpaolo.

The first one regards to the Chinese cluster. Can you tell us the performance of this cluster in second quarter for Prada? And if there were any differences in trends between Mainland China and Greater China region? And in general, what is your opinion on the trading environment in China and your outlook for the second part of the year?

Hi, Andrea Bonini. I'll go beyond that in the sense that I'm sure that the question will come. So in addition to Chinese, I'll give you also some flavor around the other nationalities. So for Chinese, it was very positive. The second quarter, it was up double digit. So it further improved versus Q1. And it was positive both in terms of local spending, but also what they spent abroad. Having said that, it's not easy. I mean, it's not without challenges in the sense that, I mean, we continue to see from a traffic point of view, industry-wide, at least what we pick up, a challenging environment in terms of traffic. So it's -- again, it's a challenge day in, day out, but the team did a great job, and they managed to achieve a very good result. Europeans is -- it was flattish in Q2, slightly improving. North American is clearly the very positive note. So very positive demand and further accelerating quarter-on-quarter. Domestic consumption and also it was flattish on -- for Japanese clients.

Understood. And my second question is on the gross margin. Do you expect gross margin in the second part of the year to be similar to that of the first part?

Yes.

We are now going to proceed with our next question. And the questions come from the line of Natasha Bonnet from Morgan Stanley.

I have three, if that's all right. So the first, Andrea, regarding Miu Miu, which grew 3% in the first half. At the start of the year, you mentioned potentially growing double digit for the full year. Do you think that's still feasible? And then also, can you give us maybe the spacing contribution in H1 from Miu Miu? And then you also mentioned that the Q2 growth of plus 3% was a normalized level. Obviously, that includes a 300 basis point impact from the Middle East. Would you say that mid-single-digit growth is a good proxy for 2027 from Miu Miu at a normalized level?

If whatever I say, then you will tell me that I said something. So I think that Miu Miu has an opportunity to grow between the 5% and the 10% long term. I've got no doubts about this. Looking to this specific year, I really thought that we would have seen an industry improvement during the year that we are not exactly seeing in terms of traffic. So we will continue to fight. We were at plus 6% in Q2. We were in plus 3% in Q1. So we had -- we have seen that kind of improvement that I was talking about. Obviously, going forward, we have a part of the world which becomes a little bit easier in terms of comps, while another part of the world remains pretty challenging. So I mean, for any of our brands, going from 5% to 10%, I think that, that would be a solid performance going forward. In terms of space, I would say that the plus 6% is with a like-for-like, 0 minus 1.

And then my second question would be on Prada, which obviously has seen an impressive re-acceleration in the second quarter. Can you give us any more KPIs of what has really driven this re-acceleration? I know you said full price sales are really strong. I mean, do you expect this to continue? And are there any regions where the brand is resonating particularly well?

I think -- I mean, if we go back, it's a long story. I mean, we knew that we had to catch up in the United States. we are catching up. I think we are growing, and we are really doing what we have to do. And I think that, that is yet a long journey. In China, for sure, again, we needed to go back to our fair share. And I think that we are trying to achieve it, but still it's a long journey. In Europe, most probably it's where we have grown the fastest in the last 4, 5 years. And this year, in some cities, we are not performing as we would love. I think the industry is not far away from what we have achieved. And Japan remains one of our places of the world where Prada is loved. And as soon as there is an opportunity with local clients, we have taken -- we are taking it, and we will always take it home.