Purpose and Values
Valvigna, 29th July 2020 - The Prada S.p.A. Board of Directors held today reviewed and approved the Consolidated Financial Results for the Half Year ended 30 June 2020.
The health crisis interrupted the Group's strong revenue momentum registered up until the end of January 2020.
The Prada Group reacted promptly with effective cost containment measures. It also reorganized production to adapt to the new situation, revised its investment plans and suspended distribution of dividends. These measures allowed the Group to control its financial resources, without affecting the Group's solid capital position.
Following the reopening of the store network, the Group has seen ongoing recovering sales trends, with significant growth in Asia as well as encouraging signs in other markets, driven by local consumption and despite the lack of tourism.
The significant reduction to Wholesale exposure and the markdown phase out have remained in place throughout the pandemic and have proved to be the right decisions to confirm the Group’s future growth.
From February to May 2020, the Prada Group operated on average with approximately 40% of stores closed globally, after closures peaked at 70% in April – even the stores which remained open were negatively impacted by restrictions on individual movement. In the weeks following the store reopenings the Prada Group has seen signs of recovery in consumer spending in all geographical areas:
E-commerce direct channel, showing a positive performance in all regions, has achieved a triple-digit growth, even after the lockdowns, supported by continuing investment in Group digital platforms.
The Wholesale channel registered Euro 91 million of sales, a meaningful decline of -71% due to the strategic decision to downsize this business in order to focus on the development of the Group’s retail channel and e-commerce, taken to strictly control all distribution channels to protect brand positioning.
Prompt reaction to contain costs and cash-out
During the COVID-19 pandemic, the Prada Group reacted promptly and took effective actions to mitigate the impact of store closures, putting in place a comprehensive program of cost cutting. This included the renegotiation of several lease agreement conditions, cancelling or postponing marketing initiatives and shrinking discretionary costs.
COVID-19 also had an impact on the Prada Group's production activities, with 21 factories shut down for approximately five weeks and then resuming operations beginning in the last week of April. This was enabled by the implementation of comprehensive measures to protect against infection and the application of scrupulous precautions to safeguard employees’ health, including systematic serological testing for all employees, daily body temperature monitoring, distancing between work stations and the supply of personal protective equipment.
The rapid resumption of manufacturing activities mainly concentrated in Italy, made possible by the adoption of the aforementioned safety measures, along with direct control over the supply chain, enabled the Prada Group to provide stores with new seasonal products on time, and to manage stock effectively without excess inventory.
In April 2020, the Board of Directors withdrew its recommendation to pay a dividend for 2019. This decision, combined with a reduction in costs and investments, has allowed the Group to maintain a stable financial position and be ready to return to a normal level of investment when markets recover.
Patrizio Bertelli, Prada Group CEO, commented: “I am very proud of the commitment and sense of responsibility demonstrated in these circumstances by all our people. The first half of 2020 saw a temporary interruption of our growth trajectory which, in a situation of progressive control of the pandemic, we are confident will gradually resume from the second half of 2020, when our store network will again be fully operational. The excellent response of local consumers after the re-openings, confirms the desirability of our products and the strong relationship with our customers, which has been further strengthened by our continued focus on digital technology. The recent positive trends in all markets, combined with our solid balance sheet and financial position, allow us to look to the future with confidence today.”