MILAN — Prada Group is aiming high.
Financial targets in the medium range include reaching revenues of around 4.5 billion euros, which implies almost doubling 2020 figures, as last year the company posted revenues totaling 2.42 billion euros. The company is also targeting an operating profit of around 20 percent of sales.
Key objectives are to double the percentage of the group’s online sales to represent 15 percent of retail revenues and to increase the productivity of directly operated stores by 30 to 40 percent.
The executive asserted that the group “expresses a conceptual and pioneering vision of fashion. In a moment of cultural and social change as the current one, luxury must continue to evolve in line with the market. The fluidity of our conversations and our perspectives allow us to continuously reinterpret the idea of luxury.”
The Capital Markets Day follows an encouraging set of first-half results, which saw a return to profit and a 60 percent jump in revenues in the first six months of the year. Highlights included triple-digit growth in its online channel, and solid gains in the Asia-Pacific and U.S. markets. In the six months ended June 30, the group reported a net profit of 97 million euros, which compares with a loss of 180 million euros in the same period last year.
Revenues amounted to 1.5 billion euros compared with 938 million euros in the first half of 2020.
The group has been actively raising its luxury positioning, slashing wholesale accounts, endorsing full-price sales by canceling markdowns and investing in online sales, marketing and communication.
In its trading update, the group is reporting an acceleration in retail sales in the third quarter, which were up 18 percent compared with the same period in 2019. It is also seeing a very strong progression of retail sales in the last quarter.
In addition, Prada registered strong online growth in the third quarter, up 400 percent compared with the third quarter of 2019.
The group saw a progressive improvement of its profitability in the third quarter in all key metrics and strong cash generation, as well as an additional improvement of circulating capital. The net financial position was close to zero at the end of September.
Bertelli said in July that he was confident in the second half and that he was planning to continue to invest in the direct control of Prada’s supply chain, which gives the group a competitive edge.
Chairman Paolo Zannoni confirmed this to WWD in his first interview since his appointment in this role at the end of May, when he succeeded Carlo Mazzi.
“We saw an acceleration in the third quarter compared with the first half,” said Zannoni.
Echoing Bertelli, he said the vertical integration of the group will allow it “to increase control over the supply chain, leading to an improvement of time to market and to strengthening of industrial know-how and more flexibility.” In addition, sustainability is also a priority and controlling the pipeline will help “guarantee the right working conditions.”
The company is proposing two new board members to expand its ESG competence, reach zero emissions and increase gender parity. They are Pamela Culpepper, founding member of Have Her Back Consulting, and Anna Maria Rugarli, corporate sustainability vice president of Japan Tobacco International. They will be part of an ESG committee to be newly formed together with Lorenzo Bertelli, head of corporate social responsibility.
Zannoni said that after a “blip slowdown” in China in August, the area picked up immediately after, but he admitted tensions with the West and potential, additional government restrictions related to the COVID-19 pandemic are cause for concern.
The U.S. market is “potentially one of the most interesting, and it grew in 2021 for Prada compared with 2020 and 2019 at higher rates than the luxury market’s growth rate.”
The U.S. accounts for 19 percent of the group’s revenues and Zannoni sees additional strong growth opportunities in the region in light of the changing demographics and distribution of wealth. The market grew more than 80 percent in the third quarter on a two-year stack.
Europe is also picking up, he said, lifted by local traffic, and the Middle East, while still a smaller market for the group, “is growing a lot.”
While the Asia-Pacific area is a solid region for the group, Zannoni singled out Korea — always a strong market for Prada — as showing an “extraordinary performance.”
Asked if Prada is contemplating an increase in prices, in line with its competitors, the chairman said there have been “gradual increases,” and that they were partially due to the increase in the price of raw materials.
Zannoni has been international adviser at Goldman Sachs since 2019, providing advice to the firm’s business across Italy and the rest of Europe. He has recently resigned as chairman of Dolce and Gabbana Holding Srl. He has long been familiar with the company as with Goldman Sachs he led Prada’s IPO project, which took place in 2011.
Zannoni joined Goldman Sachs in 1994, was named managing director in 1997, partner in 2000 and was chairman of the Italian investment banking business between 2000 and 2013. He also spent a period as co-CEO of Goldman Sachs Russia. Prior to joining Goldman Sachs, Zannoni was a vice president at Fiat SpA and a lecturer at Yale University.