Prada Annual Report 2018

2018 HIGHLIGHTS

In 2018 the Prada Group’s sales performance turned around, showing revenue growth that had been absent for some years. The results, which reflect a plan to increase volumes and profitability in the medium term, are reassuring management with respect to the effectiveness of the omnichannel strategy and of the investments made in recent years.

Changes to organizational structure, especially at an operational level, and large steps forward in the digitalization process have made the Prada Group more dynamic and able to interpret more rapidly the spirit of the times. While this has been happening through the Company, the design team has focused its creative talent on the development of products that are popular with the new generations, such as sneakers and backpacks.

The collections have benefited from a product assortment better targeted to the tastes of such market segment, while maintaining the brand identities and essential brand codes. Nylon was renewed as a major component of the Spring/Summer collection and Fall/ Winter Linea Rossa 2018 collections, and was at the center of an important communications campaign.

Handbags contributed significantly to the annual sales growth. The strategic decision to go for a product range increasingly geared toward preserving the exclusivity of the brands entailed revising the promotional sales policies to achieve more effective product positioning.

Special displays at directly operated stores and pop-up shops at prestigious department stores were used to market new collections and celebrate releases of iconic products in uniquely designed and conceptualized settings. Along with investments in the websites and in social media, these activities have further enriched the customer journey and are forging closer integration of physical retail, digital retail and communications.

The investments of the year involved the industrial area, with reinforcement of manufacturing, structures in Italy, and the corporate area, with improvements to the central and regional offices. This investment plan, prioritized with significant resources allocated to it by the Directors, enables Prada to be among the most technological advanced companies for traditional retail as well as for its own e-commerce platforms and manufacturing processes, while preserving the Group’s characteristic.

BASIS OF PREPARATION OF FINANCIAL REVIEW

The Board of Director’s Financial Review refers to the group of companies controlled by PRADA spa (the “Company”), parent company of the PRADA Group (the “Group”). This Financial Review should be read in conjunction with the Consolidated Financial Statements and the related Notes, which are an integral part thereof.

As a result of the change in the end of the annual reporting period from January 31 to December 31, approved at the General Meeting on May 31, 2017, the Prada ended December 31, 2018, whereas the corresponding 2017 statement referred to an eleven-month period (“2017 IFRS Statement of Profit or Loss”, from February 1, 2017 to December 31, 2017).

To enable comparison of the Group’s business and financial performance, the Directors have prepared the “2017 Pro-Forma Statement of Profit or Loss” based on the twelve months ended December 31, 2017.

The comments reported herein regarding revenues and operating results are based on a comparison with the “2017 Pro-Forma Statement of Profit or Loss”, whereas those regarding assets, liabilities and equity refer to the IFRSbased Consolidated Financial Statements as at December 31, 2018 and December 31, 2017.

TO OUR SHAREHOLDER

Paolo Zannoni

2018 was a transformational year for the Prada Group. Decisive actions to strengthen the business and navigate the changing luxury market produced strong growth and increased profitability.

The Prada Group delivered against each of its strategic priorities: distinctive identity, product excellence, industrial know-how, direct distribution and sustainability.

In 2018, Prada S.p.A. Board of Directors approved its ESG strategy, and we are implementing a full range of initiatives to respect the planet, its people and the cultural debate. I am truly confident that Prada will achieve most of its targets.

We confirm that all our investments are for the future as the whole organization is striving for long-term growth and not short-term gains. Prada is on course to meet the mediumterm objectives as announced at our Capital Markets Day in November 2018, and the solid financial results achieved in 2018 make me confident we will reach our goals. However, growing geopolitical tensions and escalating hostilities are of great concern and we feel for the people suffering because of the war.

Paolo Zannoni Chairman of PRADA S.p.A.

Lorenzo Bertelli

When I joined Prada S.p.A.’s Board of Directors, discussions of ESG (Environmental, Social and Governance) issues reached the highest levels of the organization, highlighting once again our commitment to such matters, which are becoming more and more visible for internal and external stakeholders.

Throughout 2018, we were engaged in promoting an internal culture more focused on social and environmental topics. The strong awareness, along with the Group’s long-term investments, enabled to advance quickly on key matters that have had a strategic role for some time, such as environmental protection and the fight against climate change.

We reiterated our commitment to diversity, equity and inclusion with the launch of numerous initiatives and programs to recruit, cultivate and retain diverse talents and to create a more inclusive workplace culture, not only within our organization but also in the industry.

These choices demonstrate the consistency between the Prada Group’s core values and its commitment to carrying out concrete projects. I believe that it is crucial to pursue a more sustainable business model, capable of an agile and coherent response to the increasingly complex challenges of the upcoming years, thanks in part to the fundamental engagement of our key stakeholders.

Lorenzo Bertelli Prada Group’s Head of Corporate Social Responsibility

PRADA GOES 90S RETRO WITH FALL 2018 COLLECTION

Prada hit it hard, sending out street silhouettes made from layers of black nylon.

Miuccia Prada took a trip down memory lane with her fall ’18 show on Sunday night at Milan Men’s Fashion Week. After all, when the decade that defined you returns to vogue, it would be churlish not to enter the fray and reclaim your heritage.

The night was actually a celebration of Prada’s iconic black nylon fabric, employed during the 1990s for everything from messenger bags to parkas.

In the fall ’18 collection there was plenty of the fabric, employed on shorts, shirts and those aforementioned bags and parkas, and Prada also tapped creatives Ronan and Erwan Bouroullec, Konstantin Grcic, Herzog and de Meuron to create specialedition items.

The footwear also channeled a Nineties sportswear vibe, with on-trend chunky sneaker boots featuring red rip-cord tags — another takeout from the label’s archive.

And while you could see where they were going with high-heeled women’s sock boots — neoprene gelled perfectly with the nylon theme.

The designer presented the collection in a specially constructed Prada warehouse, which was stacked with wooden crates swathed in pop-colored plastic tarpaulins or covered with renderings of her label’s greatest hits, including those famous hot-rod heels of fall ’12 and the platform espadrille brogues of 2011.

For the collection, the Italian fashion house went back to its industrial roots, accessing its iconic nylon fabric. A standout of the show was Dutch architect Rem Koolhaas’ design of a reverse jetpack backpack, styled on a model with a yellow bucket hat.

Keeping in mind those cartoon caper kicks of last season, one might have expected another set of bold, brash looks, but the fall ’18 shoes on offer for men felt positively minimal.

However, there’s nothing like a little palette cleanser while you take stock and reconsider the way ahead.

PRADA BRINGS THE INDUSTRIAL REVOLUTION TO THE RUNWAY

It seems that everyone is feeling a bit gloomy these days, and really, who can blame them? That anxiety has been spilling over into the Fall 2018 runways, whether it’s through party-until-you-can’t-rememberit’s-happening style collections like Tom Ford’s or post-apocalyptic undertones like Raf Simons’s vision for Calvin Klein.

The same could be true for Prada’s Fall 2018 collection, a line infused with industrialchic touches — from the neon-backlit set to the practical galoshes worn by half the models. Prada’s now-famous nylon made a return in a big way, appearing on everything from outerwear to bags. The color scheme of the night was neon against neutral backgrounds; think bright orange beading scattered across a sheer black dress or an electric orange tulle bow trailing behind a khaki coat. Ladylike shapes in pleated midi-skirts and dresses were paired with practical, utilitarian shoe choices like rubber boots or elastic-tied heels.

Bright structured tweeds were layered over chiffon, acid-spill florals; bucket hats (no, they’re not going away) were paired with matching oversize vests and plastic fringed skirts. Fans of the brand will note that the flame wedges from Spring 2012 are back this time with dangerous acid tones and a curved shape that suggest more of a factory fire than the flames of a hot rod.

Held inside the nearly finished Rem Koolhaas tower of Fondazione Prada, attendees faced a wall of windows overlooking train tracks and clusters of neon signs, which hung atop cranes and represented motifs from past Prada collection. With a late evening show and the Milan cityscape twinkling in the distance, the effect was at once polished and otherworldly (the eerie, remixed version of Blondie’s “Heart of Glass” certainly contributed).

These were bright clothes for dark days.

CONSOLIDATED STATEMENT

(Amounts in thousands of Euro)

Assets

Current Assets

Cash & Cash equivalents

Trade receivables, net

Inventories, net

Derivative financial instruments

Receivables from & advance payments to - current

Other current assets

TOTAL CURRENT ASSETS

Non-current assets

Property, plant & equipment

Intangible assets

Investments in equity instruments

Deferred tax assets

Other non-current assets

Derivative financial instruments - non - current

GENERAL INFORMATION

PRADA spa (the “Company”), together with its subsidiaries, is listed on the Hong Kong Stock Exchange (HKSE code: 1913). It is one of the leading companies in the luxury goods industry, where it operates with the Prada, Miu Miu, Church’s and Car Shoe brands in the design, production and distribution of luxury handbags, leather goods, footwear, clothing and accessories. In addition, with its acquisition of Pasticceria Marchesi 1824, the Group made, in the last years, its entry into the food industry , where it’s consistently positioned at the highest levels of quality. The Consolidated Financial Statements were approved and authorized for issue by the Board of Directors of PRADA spa on March 15, 2019.

SCOPE OF CONSOLIDATION

The consolidated financial information comprises the account of PRADA spa and the Italian and foreign companies over which the Company has the right to exercise control either directly or indirectly. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

The companies in which the Group has more than 50% of the voting rights or that are controlled by the Group in some other way are consolidated on a line-by-line basis from the date on which the Group acquires control until the date on which that control ends. Associated undertakings (“associates”) are consolidated using the equity method. Significant influence is defined as the power to participate in the financial and operating policy decisions of the investee without having control or joint control. The companies included in the Consolidated Financial Statements are listed in Note 42.