Prada SpA (1913.HK)img.jrjimg.cn › 2011 › 08 › 20110804135457033.pdf · EPS growth 144.8 54.1...

August 4, 2011

ACTION

Buy Prada SpA (1913.HK)

Return Potential: 27% Equity Research

Combining style and growth; initiate with a Buy rating

Source of opportunity

We initiate Prada with a Buy rating and a 12-month price target of

HK$58.10 implying 27% upside. Prada is a leading global luxury brand

enjoying strong growth, particularly in Asia Pacific, where revenues were

up 63% in FY2011 (Y/E Jan). The Prada Group has four luxury brands:

Prada, Miu Miu, Church’s and Car Shoe. The largest, Prada, is among a

small group of leading global luxury brands that have the scale, through

brand power and a global store network, to capitalize on the growth

opportunity we see for the industry. Miu Miu, the second largest brand, is

the fastest growing, with revenue growth of 40% in FY2011.

Catalyst

Prada report 1H sales on August 22, 2011, and interim results on

September 19, 2011. We believe that the delivery of sector leading top-line

performance and sector leading improvements in returns and margins will

act as a catalyst for the shares. Prada Group revenues increased 31% in

FY2011, outpacing average sector growth of 16%. We expect this rapid

growth to continue to lead the sector, driven by: (1) increased store

openings, (2) exposure to fast growth markets, (3) growth in the leather

goods category, and (4) continued rapid growth of Miu Miu. We also

expect margins and returns to improve to best peers in the sector.

Valuation

Our HK$58.10, 12-month price target is set using a methodology that is

consistent with our European Luxury sector and our Asia Consumer sector

coverage. The multiple we use reflects Prada’s forecast growth and returns

relative to its European and Asian peer group and implies 12.6x lease

adjusted EV/EBITDAR or a P/E of 28x CY2012 earnings estimates.

Key risks

A slowing of global GDP, availability of suitable real estate for store

openings, fashion risk and margin pressure as fixed costs are added.

INVESTMENT LIST MEMBERSHIP

Pan-Europe Buy List

Coverage View: Neutral

William Hutchings +44(20)7051-3017 [email protected] Goldman Sachs International Goldman Sachs does and seeks to do business with companies

covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC see the end of the text. For other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.

Joshua Lu +852-2978-1024 [email protected] Goldman Sachs (Asia) L.L.C. Szilvia Bor +44(20)7552-5984 [email protected] Goldman Sachs International Lucy Baldwin +44(20)7552-5988 [email protected] Goldman Sachs International

The Goldman Sachs Group, Inc. Global Investment Research

Growth

Returns *

Multiple

Volatility Volatility

Multiple

Returns *

Growth

Investment Profile

Low High

Percentile 20th 40th 60th 80th 100th

* Returns = Return on Capital For a complete description of the

investment profile measures please refer to

the disclosure section of this document.

Prada SpA (1913.HK)

Europe Retail Peer Group Average

Key data Current

Price (HK$) 45.65

12 month price target (HK$) 58.10

Upside/(downside) (%) 27

Market cap (HK$ mn) 116,810.3

Enterprise value (€ mn) 10,807.2

1/11 1/12E 1/13E 1/14E

Revenue (€ mn) 2,046.7 2,489.9 2,963.2 3,484.4

EBIT (€ mn) 418.4 576.4 723.3 879.9

EPS (€) 0.10 0.15 0.19 0.24

EV/EBITDA (X) NM 15.1 11.9 9.4

P/E (X) NM 27.3 21.4 17.4

Dividend yield (%) NM 0.0 0.0 0.0

FCF yield (%) NM 2.2 3.2 4.7

CROCI (%) 14.9 15.1 15.9 16.6

CROCI/WACC (X) -- -- -- --

EV/GCI (X) NM 2.4 2.1 1.9

Price performance chart

38

40

42

44

46

48

50

May-11 Jun-11 Jul-11

320

330

340

350

360

370

380

Prada SpA (L) FTSE World Europe (EUR) (R)

Share price performance (%) 3 month 6 month 12 monthAbsolute -- -- --

Rel. to FTSE World Europe (EUR) -- -- --

Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 8/03/2011 close.

August 4, 2011 Prada SpA (1913.HK)

Prada SpA: Summary Financials

Analyst Contributors

William Hutchings

[email protected]

Joshua Lu

[email protected]

Szilvia Bor

[email protected]

Lucy Baldwin

[email protected]

Goldman Sachs Global Investment Research 2

Profit model (€ mn) 1/11 1/12E 1/13E 1/14E Balance sheet (€ mn) 1/11 1/12E 1/13E 1/14E

Total revenue 2,046.7 2,489.9 2,963.2 3,484.4 Cash & equivalents 79.5 128.1 316.2 455.3

Operating costs (1,628.3) (1,913.5) (2,239.9) (2,604.5) Accounts receivable 274.2 299.0 314.6 321.6

R&D -- -- -- -- Inventory 280.4 327.0 382.1 443.9

Lease payments (295.1) (369.5) (447.1) (528.2) Other current assets 118.9 118.9 118.9 118.9

Other operating profit/(expense) 0.0 0.0 0.0 0.0 Total current assets 753.0 873.0 1,131.8 1,339.7

EBITDA 535.9 714.6 893.3 1,090.8 Net PP&E 536.7 650.0 767.4 850.9

Depreciation & amortisation (117.5) (138.2) (170.0) (210.9) Net intangibles 869.1 869.1 869.1 869.1

EBIT 418.4 576.4 723.3 879.9 Total investments 1.8 1.8 1.8 1.8

Net interest income/(expense) (30.2) (12.2) (6.7) 3.3 Other long-term assets 188.4 143.1 143.1 143.1

Associates 0.0 0.0 0.0 0.0 Total assets 2,348.9 2,537.0 2,913.3 3,204.7

Profit/(loss) on disposals 0.0 0.0 0.0 0.0

Others (recurring) 0.0 0.0 0.0 0.0 Accounts payable 233.9 265.1 301.2 340.6

Pretax profits 388.2 564.2 716.6 883.2 Short-term debt 177.2 50.0 50.0 50.0

Income tax (134.7) (174.9) (222.1) (273.8) Other current liabilities 231.1 231.1 231.1 231.1

Tax rate (%) 34.7 31.0 31.0 31.0 Total current liabilities 642.1 546.1 582.3 621.7

Minorities (2.7) (2.7) (2.7) (2.7) Long-term debt 303.4 303.4 284.3 93.8

Preferred dividends 0.0 0.0 0.0 0.0 Other long-term liabilities 193.4 193.4 193.4 193.4

Net income (pre-exceptionals) 250.8 386.5 491.7 606.6 Total long-term liabilities 496.8 496.8 477.7 287.1

Other non-recurring items post tax 0.0 0.0 0.0 0.0 Total liabilities 1,138.9 1,042.9 1,060.0 908.8

Net income 250.8 386.5 491.7 606.6

EPS (underlying) (€) 0.10 0.15 0.19 0.24 Preferred shares 0.0 0.0 0.0 0.0

EPS (basic, reported) (€) 0.10 0.15 0.19 0.24 Total common equity 1,204.4 1,485.6 1,842.0 2,281.9

Weighted shares outstanding (mn) 2,558.8 2,558.8 2,558.8 2,558.8 Minority interest 5.8 8.5 11.3 14.0

Common dividends declared 0.0 0.0 0.0 0.0 Total liabilities & equity 2,349.0 2,537.0 2,913.3 3,204.7

DPS (€) 0.00 0.00 0.00 0.00 Capitalised leases 2,360.4 2,955.9 3,577.2 4,225.5

Dividend payout ratio (%) 0.0 0.0 0.0 0.0 Capital employed 1,690.7 1,847.5 2,187.6 2,439.6

Dividend cover (X) NM NM NM NM

Growth & margins (%) 1/11 1/12E 1/13E 1/14E Adj for unfunded pensions & GW 0.0 0.0 0.0 0.0

Revenue growth 31.1 21.7 19.0 17.6 Adj capital employed 1,690.7 1,847.5 2,187.6 2,439.6

EBITDA growth 84.7 33.3 25.0 22.1 Gross cash invested 4,787.2 5,674.4 6,617.7 7,589.8

EBIT growth 123.7 37.8 25.5 21.7

Net income growth 144.8 54.1 27.2 23.4 Ratios 1/11 1/12E 1/13E 1/14E

EPS growth 144.8 54.1 27.2 23.4 CROCI (%) 14.9 15.1 15.9 16.6

DPS growth -- -- -- -- CROCI/WACC (X) -- -- -- --

EBITDA margin 26.2 28.7 30.1 31.3 ROIC (%) 16.7 18.4 18.3 18.2

EBIT margin 20.4 23.1 24.4 25.3 ROIC/WACC (X) -- -- -- --

ROA (%) 10.9 12.8 13.5 14.0

Cash flow statement (€ mn) 1/11 1/12E 1/13E 1/14E WACC (%) -- -- -- --

Net income 250.8 386.5 491.7 606.6 Inventory days 50.0 47.9 47.1 46.5

D&A add-back (incl. ESO) 117.5 138.2 170.0 210.9 Asset turnover (X) 3.8 3.8 3.9 4.1

Minority interest add-back 2.7 2.7 2.7 2.7 Net debt/equity (%) 33.1 15.1 1.0 (13.6)

Net (inc)/dec working capital (75.4) (40.2) (34.6) (29.4) EBITDA interest cover (X) 17.8 58.4 132.9 (335.3)

Other operating cash flow 72.1 0.0 0.0 0.0

Cash flow from operations 367.7 487.2 629.8 790.9 Valuation 1/11 1/12E 1/13E 1/14E

EV/sales (X) NM 4.3 3.6 2.9

Capital expenditures (187.6) (251.5) (287.4) (294.4) EV/EBITDAR (X) NM 12.7 10.6 9.0

Acquisitions (4.0) 0.0 0.0 0.0 EV/EBITDA (X) NM 15.1 11.9 9.4

Divestitures 0.0 0.0 0.0 0.0 EV/EBIT (X) NM 14.6 12.1 10.3

Others 0.0 0.0 0.0 0.0 P/E (X) NM 27.3 21.4 17.4

Cash flow from investing (191.6) (251.5) (287.4) (294.4) Dividend yield (%) NM 0.0 0.0 0.0

FCF yield (%) NM 2.2 3.2 4.7

Dividends paid (common & pref) (59.4) (60.0) (135.2) (166.8) EV/GCI (X) NM 2.4 2.1 1.9

Inc/(dec) in debt (109.9) (127.2) (19.1) (190.5) EV/adj. capital employed (X) NM 8.0 7.6 7.3

Other financing cash flows 3.5 0.0 0.0 0.0 Price/book (X) NM 7.1 5.7 4.6

Cash flow from financing (165.8) (187.2) (154.3) (357.4)

Total cash flow 10.3 48.6 188.1 139.1 Note: Ratios are adjusted for leases where appropriate. Only separately disclosed where significant and ongoing.

Capex/D&A (%) 159.6 182.0 169.1 139.6

Reinvestment rate (%) 42.3 47.7 43.3 35.9

Cash flow cover of dividends (X) NM NM NM NM Note: Last actual year may include reported and estimated data.

Free cash flow cover of dividends (X) NM NM NM NM Source: Company data, Goldman Sachs Research estimates.



Table of contents

Overview: Combining style and growth 4

Valuation: Upside remains as we look to price the growth 7

The opportunity: Luxury Goods, a trillion dollar industry by 2025? 12

Prada Group snapshot by brand, geography, category and channel 22

Growth strategy: Rolling out the store network 33

Profit drivers: Mix analysis, margin initiatives and leverage 38

Financials: Sector-leading growth, sector-catching margins 42

Risks: Slower growth, rising costs, execution of growth strategy 50

Appendix 1: Company profile 51

Appendix 2: Detailed financials 56

Appendix 3: Global Luxury Sector Performance 65

The prices in the body of this report are based on the market close of August 2, 2011.



Overview: Combining style and growth

We initiate coverage of Prada with a Buy rating and a 12-month price target of

HK$58.10 which implies 27% upside. In our view Prada offers an exceptional

investment opportunity in the Luxury Goods sector, given its sector leading top-line

growth combined with our forecast for material improvements in margins and

returns.

Overview

Prada is a leading global luxury company operating in the luxury ready-to-wear, footwear

and accessories segments. We believe its four brands (Prada, Miu Miu, Church’s and Car

Shoe) are well positioned to grow as the group pursues its clearly defined growth strategy

of:

continuing to expand the DOS (directly operated store) network;

strengthening global coverage, particularly in fast growing Asian markets;

capturing the strong growth potential of Miu Miu; and

continuing to improve margins and profitability.

Potential to continue to outperform peers

The Prada brand is among the largest in the global luxury goods industry (alongside Louis

Vuitton, Gucci, Chanel etc.). In 2010 (Prada year to January 2011), Prada’s growth was twice

that of the luxury goods sector average, and with group net sales of over €2 bn, it is now

one of the world’s largest luxury companies.

Exhibit 1: Prada is one of the largest leading luxury goods

companies… Sales, 2010 (€ mn)

Exhibit 2: … yet it currently generates lower margins

than best-in-class EBIT 2010 (€ mn)

Source: Company data.


Despite its success to date, we see significant potential for the group to continue to grow

faster than its peers. More store openings, to bring the size of the network in line with that

of some of its largest peers, the continual evolution of the range towards higher-margin

leather goods and continued expansion of the group’s global footprint, especially in Asia,

should lead to continued top-line growth and margin improvement, in our view.

0

1000

2000

3000

4000

5000

6000

7000

8000

0%5%10%15%20%25%30%35%40%

0

500

1000

1500

2000

2500

3000

EBIT EBIT margin



Exhibit 3: Prada is under-represented in the core Asia

market... Sales in Asia ex-Japan, 2010, € mn

Exhibit 4: … due in part to its smaller global store

network Number of directly operated stores



Nearly a hundred years old

Prada’s core offering is in the luxury segment of its core product categories: ready-to-wear

(RTW), footwear and accessories. Prada was founded in 1913 and the company in its

current form was formed in the 1970s by Ms Miuccia Prada, the group’s President, and her

husband Mr Patrizio Bertelli, the Chief Executive. Prada’s aim is to be recognized as a

leading global luxury brand, offering its consumers innovative, high quality fashion.

Positioned in a growing market

As discussed in our June 2, 2010 report, A trillion dollar global industry by 2025?, we

believe that global spending in luxury goods will grow faster than GDP over the next 15

years. Within this, the most recognized and largest brands (we use the listed luxury

industry as a proxy) are likely to grow faster than the overall market.

We expect Prada’s addressable market for luxury goods to increase by a multiple of 2x by

2025 (from 2010) and allow the industry to grow 9% pa (at a multiple of 2.2x to GDP),

relative to the historical multiple of 1.8x (1995-2010). We believe that the listed luxury space

has grown on average 200bp faster than the global industry. We believe that the Prada

Group can outpace this market estimate given that management has planned for faster

retail growth. We forecast Prada Group can deliver 18% top-line CAGR over FY2011-14.

Luxury in China: Prada brand and Miu Miu under-represented

In our view China represents the single country with the greatest opportunity for growth

for the luxury goods sector. We forecast that the addressable market for luxury goods in

China (those with incomes greater than US$30,000) is set to grow by a multiple of 15x to

reach 200 mn people by 2025 (from 15 mn today). The Prada Group delivered net sales

growth of 63% in Asia Pacific in FY2011 and we estimate sales in mainland China now

account for 7% of the group total of €2,047 mn and sales in China (including Hong Kong

and Macau) are 19%. Total net sales to Asia ex-Japan are 32%, or €646 mn. We believe that

c.30% of global retail sales are to Chinese consumers, split 50:50 between sales in China

and those travelling. Prada remains under-represented on a global basis relative to other

global brands, particularly in China (Exhibit 3), and we expect this to be the focus of its new

store openings over the next few years. We forecast the store network in Asia (ex-Japan) to

grow to 194 stores in FY2014 from 104 in FY2011.

0

500

1000

1500

2000

2500

3000

207

71

451

317

193175

148 145

0

50

100

150

200

250

300

350

400

450

500

Prada Miu Miu Louis

Vuitton

Gucci Hermes Dior Bottega

Veneta

Chanel



Valuation: upside remains despite 24% post IPO rise

We initiate Prada with a Buy rating and a 12-month price target of HK$58.10 implying 27%

upside. We set our price target with a methodology consistent with our European Luxury

sector and our Asia Consumer sector coverage. Our earnings multiple is set to reflect the

growth and returns of Prada relative to its European and Asian peer group.

Financials: FY2011 showed strategy delivering

In FY2011, Prada Group net revenues grew 31%. The fastest segments of growth came

from Asia (ex-Japan) 63%, leather goods 42% and the retail channel 44%. The company

also saw a significant improvement in profit margins, with the EBITDA margin up 760bp to

26.2%.

We expect Prada Group to deliver best-in-class top-line growth, driven by its focus on store

based expansion. Management expects to open c.80 stores pa over FY2011-14, and we

forecast that this can deliver top-line CAGR growth of 19% pa over the same period. We

forecast EBITDA margins will continue to progress towards the soft luxury sector average.

Should management achieve this growth, we estimate that the company will continue to

deliver improvements in return on cash invested (CROCI) to 16.7% in FY2014 from 14.9% in

FY2011.

Risks: Expansion, execution and macro conditions

Key risks to Prada’s strategy and growth potential include slowing global GDP, availability

of suitable real estate for store openings, fashion risk and margin compression as fixed

costs are added.



Valuation: Upside remains as we look to price the growth

We value Prada using a methodology consistent with our European Luxury goods sector

and Asia consumer coverage. We apply a lease-adjusted EV/EBITDAR multiple of 12.6x to

CY2012 forward earnings. We believe that this multiple appropriately reflects the relative

growth and returns of Prada. For primary comparison we use the quoted global luxury

goods companies as a peer group; however, we also examine Prada’s valuation in the

context of the Asia listed peer group.

Prada a fast growing global luxury brand

Comparing Prada to our global quoted luxury goods companies, we note that based on our

estimates, Prada has top-quartile sales growth, top-quartile net income growth,

comparable sector margins and is showing improvements in returns on capital.

Exhibit 5: Our multiple reflects top of sector sales

growth… Target EV/EBITDAR multiple vs. Sales CAGR 2010-13E for

European listed Global Consumer Discretionary sector

Exhibit 6: … and EBITDA margin expansion Target EV/EBITDAR multiple vs. EBITDA CAGR 2010-13E for

European listed Global Consumer Discretionary sector

Source: Goldman Sachs Research estimates.


Exhibit 7: And implies a moderate premium to CROCI …Target EV/EBITDAR multiple vs. CROCI 2013E for European

listed Global Consumer Discretionary sector

Exhibit 8: … and premium to asset valuation Target EV/GCI multiple vs. CROCI 2013E for European listed

Global Consumer Discretionary sector



5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

15.0x

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Target EV/EBITDAR multiple

Sales CAGR 2010‐13E

BNG.MI

TOD.MI

GEO.MI

PRTP.PA

ESSI.PA

LUX.MI

ADSGn.DE

HMb.ST

ITX.MC

PUMG.DE

BULG.MI

BRBY.L

LVMH.PA

CFR.VX

UHR.VX

PNDORA.CO

BOSG_p.DE

1913.HK

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

15.0x

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%


EBITDA CAGR 2010‐13E

BNG.MI

TOD.MI

GEO.MI

PRTP.PA

ESSI.PA

LUX.MI

ADSGn.DE

HMb.ST

ITX.MC

PUMG.DE

BULG.MI

BRBY.L

LVMH.PA

CFR.VX

UHR.VX

PNDORA.CO

BOSG_p.DE

1913.HK

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

15.0x

5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%


CROCI 2013E

BNG.MI

TOD.MI

GEO.MI

PRTP.PA

ESSI.PA

LUX.MI

ADSGn.DE

HMb.ST

ITX.MC

PUMG.DE

BULG.MI

BRBY.L

LVMH.PA

CFR.VX

UHR.VX

BOSG_p.DE

1913.HK

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

5.0% 7.0% 9.0% 11.0% 13.0% 15.0% 17.0% 19.0% 21.0% 23.0% 25.0%

Target EV/G

CI

CROCI 2013E

BNG.MI

TOD.MI

GEO.MI

PRTP.PA

ESSI.PA

LUX.MIADSGn.DE

HMb.ST

ITX.MC

PUMG.DE

BULG.MI

BRBY.L

LVMH.PA

CFR.VX

UHR.VX

1913.HK



Exhibit 9: Our price target reflects the sales growth…

Target price P/E multiple CY2012 vs. sales growth 2011-13E

Exhibit 10: … and earnings growth of the Asia peer group

Current price P/E multiple CY2011 vs. EPS growth 2011-13E

Source: Goldman Sachs Research estimates. Bloomberg consensus estimates for Trinity Ltd, Hengdeli Holdings Ltd, China Lilang Ltd, L'Occitane Int’l SA, Luk Fook Holdings Internationa, SA SA International Holdings, Peak Sport Products Co Ltd, IT Ltd, Chow Sang Sang Holdings Int’l, Giordano International Ltd.

Source: Goldman Sachs Research estimates. Bloomberg consensus estimates for Trinity Ltd, Hengdeli Holdings Ltd, China Lilang Ltd, L'Occitane Int’l SA, Luk Fook Holdings Internationa, SA SA International Holdings, Peak Sport Products Co Ltd, IT Ltd, Chow Sang Sang Holdings Int’l, Giordano International Ltd.

Exhibit 11: Prada top-quartile sales growth

Sales growth 2011-13E

Exhibit 12: Prada average operating margins

EBIT margin 2010-13E

Source: Company data, Goldman Sachs Research estimates.


Exhibit 13: Prada top-quartile net income growth

Net income growth, 2010-13E

Exhibit 14: Prada in line with sector returns

CROCI, 2010-13E



‐

5.0

10.0

15.0

20.0

25.0

30.0

35.0

8.0% 13.0% 18.0% 23.0% 28.0%

2011E P/E

Sales CAGR CY 2011E‐13E

Trinity

Samsonite Hengdeli

Belle

China Lilang

L'Occitane

Luk Fook

SA SA

Peak Sports

IT

Daphne

Chow Sang Sang

Ports Design

XTEPEspirit Li Ning

Giordano

361 degrees

Anta Sports

Dongxiang

Bosideng

Prada

‐

5.0

10.0

15.0

20.0

25.0

30.0

35.0

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

2011E P/E

EPS CAGR CY2011E‐13E

Trinity

SamsoniteHengdeli

Belle

Chow Sang Sang L'OccitaneLuk Fook

SA SA

Peak Sports

ITDaphne

Ports Design

XTEP

Espirit

Li NingBosideng

Giordano

361 degrees

Anta Sports

Prada

Dongxiang

0%

5%

10%

15%

20%

25%

Golden Eagle

Burberry

Belle International

Prada

The Swatch

Group

Pandora

Ferragam

o

Richemont

Tod's

LVMH

Herm

es

Bulgari

Tiffany

Lifestyle

Polo Ralph Lauren

0%

10%

20%

30%

40%

50%

60%

70%Golden Eagle

Lifestyle

Pandora

Herm

es

The Swatch

Group

Prada

Belle International

Tod's

LVMH

Richemont

Tiffany

Burberry

Polo Ralph Lauren

Ferragam

o

Bulgari

0%

10%

20%

30%

40%

50%

60%

70%

80%

Bulgari

Prada

Burberry

Richemont

Belle

International

Golden Eagle

LVMH

Pandora

Ferragam

o

Tod's

The Swatch

Group

Herm

es

Tiffany

Polo Ralph Lauren

Lifestyle

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Pandora

Belle

International

Polo Ralph Lauren

Herm

es

Richemont

Golden Eagle

Tiffany

Burberry

Tod's

The Swatch

Group

Lifestyle

Prada

LVMH

Ferragam

o

Bulgari



Exhibit 15: Prada has a more efficient balance sheet

Net debt: EBITDA 2010-13E

Exhibit 16: Prada investing ahead of the sector

Capex as % of sales, 2010-13E



Exhibit 17: Prada growth is consistently outpacing the

sector Dynamic sales growth, %

Exhibit 18: We forecast Prada to lead the sector on

margins Dynamic EBIT margins, %



‐1.8x

‐1.6x

‐1.4x

‐1.2x

‐1.0x

‐0.8x

‐0.6x

‐0.4x

‐0.2x

0.0x

0.2x

0.4x

0.6x

LVMH

Bulgari

Prada

Tiffany

Ferragam

o

Polo Ralph Lauren

Burberry

Tod's

Golden Eagle

Pandora

Lifestyle

Belle

International

Herm

es

The Swatch

Group

Richemont

9%8% 8%

7% 7% 7% 6% 6% 6% 6%5% 4% 4%

3%

‐1%

1%

3%

5%

7%

9%

11%

13%

15%

Prada

Lifestyle

Burberry

Tod's

Herm

es

Richemont

The Swatch

Group

Bulgari

Tiffan

y

LVMH

Belle International

Polo Ralph Lauren

Ferragam

o

Pandora

‐10%

‐5%

0%

5%

10%

15%

20%

25%

30%

35%

2009 2010 2011E 2012E 2013E 2014E

Industry Prada

0%

5%

10%

15%

20%

25%

30%

2009 2010 2011E 2012E 2013E 2014E

Industry Prada

August 4, 2011

Prada SpA (1913.H

K)

Goldm

an Sachs Global Investm

ent Research

10

Exhibit 19: Global Luxury Valuation


CY11 CY12 CY13 CY11 CY12 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13 CY11 CY12 CY13Prada 28.2x 21.9x 17.7x 47.7x 40.3x 4.4x 3.6x 3.0x 15.4x 12.0x 9.5x 2.5x 2.2x 1.9x 2.2% 3.2% 4.6%Burberry 23.6x 19.1x 15.6x 24.7x 21.1x 3.4x 2.8x 2.4x 14.4x 11.4x 9.2x 3.1x 2.8x 2.4x 1.6% 3.0% 4.2%Hermes 43.7x 37.5x 32.5x 43.5x 38.7x 8.8x 7.7x 6.6x 26.0x 22.5x 19.3x 8.5x 6.9x 6.0x 2.1% 1.4% 2.6%LVMH 17.7x 15.0x 12.8x 23.6x 20.8x 2.6x 2.2x 1.9x 9.6x 8.2x 7.0x 1.7x 1.5x 1.4x 3.7% 4.2% 5.5%PPR 13.7x 10.8x 9.1x 17.4x 14.7x 1.2x 1.1x 0.9x 8.4x 6.8x 5.6x 0.9x 0.9x 0.8x 7.7% 10.3% 11.7%Richemont 17.2x 13.3x 11.1x 30.8x 26.6x 2.7x 2.3x 1.9x 10.3x 8.2x 6.7x 2.5x 2.1x 1.8x 3.5% 4.2% 5.4%Swatch 17.8x 12.9x 10.7x 23.5x 20.4x 1.9x 1.4x 1.2x 6.7x 4.8x 4.0x 1.3x 1.1x 0.9x 2.1% 2.2% 2.8%Tod's 19.0x 15.4x 13.1x 25.7x 22.6x 2.8x 2.4x 2.1x 10.5x 8.7x 7.4x 2.5x 2.2x 2.0x 3.0% 3.9% 4.5%Luxottica 19.4x 16.0x 13.5x 24.0x 20.6x 1.9x 1.7x 1.5x 9.9x 8.3x 7.0x 1.3x 1.2x 1.1x 5.4% 6.2% 7.4%Average 19.6x 15.5x 12.9x 27.2x 23.4x 2.6x 2.2x 1.9x 10.7x 8.6x 7.1x 2.0x 1.7x 1.6x 4% 5% 6%Coach 19.0x 16.4x 14.3x 21.7x 19.0x 3.8x 3.2x 2.7x 10.8x 9.3x 7.8x 11.9x 10.9x 9.4x 5.2% 5.9% 7.0%Polo Ralph Lauren 20.1x 17.9x 15.7x 20.1x 17.4x 1.8x 1.6x 1.4x 10.5x 9.4x 8.1x 3.8x 3.5x 3.2x 4.3% 5.4% 6.4%Tiffany 20.0x 17.7x 16.1x 19.0x 16.5x 2.6x 2.4x 2.2x 10.4x 9.3x 8.5x 2.6x 2.4x 2.3x 1.6% 4.3% 5.0%Average 19.7x 17.3x 15.4x 20.3x 17.6x 2.7x 2.4x 2.1x 10.6x 9.3x 8.2x 6.1x 5.6x 5.0x 4% 5% 6%Belle International 25.6x 20.0x 16.7x 37.0x 30.3x 3.8x 3.1x 2.7x 17.6x 13.3x 10.8x 7.8x 6.6x 5.5x 3.6% 3.3% 3.7%Trinity 29.8x 22.7xHengdeli 24.2x 18.4xL'Occitane 23.3x 17.5xAverage 19.9x 15.5x 13.4x 27.2x 21.4x 3.5x 2.9x 2.5x 13.8x 10.4x 8.6x 6.3x 5.3x 4.5x 4% 5% 6%

Macy's 10.7x 9.5x 8.8x 12.8x 11.3x 0.7x 0.6x 0.6x 5.2x 4.7x 4.3x 0.8x 0.8x 0.7x 5.0% 12.1% 14.4%Nordstrom 15.0x 13.4x 11.9x 17.4x 15.1x 1.0x 0.9x 0.8x 7.0x 6.3x 5.5x 1.5x 1.4x 1.3x 8.2% 7.9% 9.1%Saks 26.9x 20.0x 17.8x 35.7x 26.0x 0.6x 0.6x 0.5x 7.0x 6.4x 5.6x 0.7x 0.7x 0.6x -0.1% 3.1% 5.0%Average 17.5x 14.3x 12.8x 22.0x 17.5x 0.8x 0.7x 0.6x 6.4x 5.8x 5.1x 1.0x 1.0x 0.9x 4% 8% 9%Golden Eagle Retail Group 26.0x 20.6x 16.5x 31.7x 25.3x 8.9x 7.2x 6.0x 16.8x 13.2x 10.7x 4.3x 3.2x 2.4x 0.7% 0.9% 0.5%Maoye International 19.7x 16.1x 12.9x 38.5x 27.8x 5.1x 4.0x 3.0x 12.5x 9.7x 7.4x 1.8x 1.6x 1.4x -6.7% -2.0% 2.1%Lifestyle International 25.9x 24.3x 23.2x 25.2x 21.9x 8.0x 7.2x 6.5x 18.3x 16.2x 15.0x 3.7x 3.4x 3.2x 4.2% 4.1% 4.1%Parkson Retail Group 22.5x 18.9x 14.8x 27.4x 22.1x 4.8x 3.9x 3.1x 13.9x 11.4x 8.7x 3.7x 3.3x 3.0x 4.7% 5.9% 7.3%New World Department stores 13.2x 13.3x 17.2x 16.5x 2.1x 1.9x 6.6x 5.6x 1.0x 0.9x 5.9% 5.5%Intime Department Store 25.4x 18.4x 14.1x 31.4x 24.5x 6.7x 5.1x 4.0x 17.1x 12.6x 9.8x 1.6x 1.4x 1.2x 8.4% 8.5% 9.4%Average 22.1x 18.6x 16.3x 28.6x 23.0x 6.0x 4.9x 4.5x 14.2x 11.5x 10.3x 2.7x 2.3x 2.2x 3% 4% 5%

Inditex 19.9x 16.4x 14.1x 26.2x 23.1x 2.5x 2.1x 1.8x 10.5x 8.5x 7.1x 2.4x 2.2x 1.9x 5.2% 6.2% 7.3%H&M 21.2x 18.6x 16.5x 19.7x 16.8x 2.8x 2.6x 2.3x 13.2x 11.7x 10.5x 2.8x 2.6x 2.4x 3.6% 3.8% 4.6%Average 20.6x 17.5x 15.3x 23.0x 19.9x 2.7x 2.3x 2.0x 11.8x 10.1x 8.8x 2.6x 2.4x 2.2x 4% 5% 6%Gap 12.6x 13.0x 12.3x 11.8x 10.0x 0.7x 0.7x 0.6x 5.3x 5.3x 5.1x 1.2x 1.0x 0.9x 8.2% 7.3% 7.7%Philips Van Heusen 13.5x 11.7x 9.9x 1.1x 1.0x 0.9x 7.8x 6.8x 5.7x 4.2x 3.9x 3.5x 5.9% 9.6% 11.5%Average 13.0x 12.4x 11.1x 11.8x 10.0x 0.9x 0.8x 0.8x 6.5x 6.1x 5.4x 2.7x 2.4x 2.2x 7% 8% 10%Espirit Holdings 6.8x 5.9x 18.0x 17.7x 0.6x 0.6x 3.8x 3.1x 1.1x 1.0x 9.6% 11.2%Fast Retailing 23.6x 19.1x 22.9x 18.9x 1.4x 1.2x 8.9x 7.5x 7.5x 6.3x 3.5% 3.4%Li & Fung 17.8x 15.0x 11.4x 26.8x 21.4x 0.6x 0.6x 0.5x 12.2x 10.0x 8.0x 2.4x 2.2x 2.0x 8.0% 8.9% 11.8%Stella International 15.2x 13.5x 12.3x 13.6x 11.7x 1.2x 1.1x 1.0x 10.8x 9.6x 8.6x 3.0x 2.6x 2.3x 3.5% 4.6% 5.1%Average 15.9x 13.4x 11.8x 20.3x 17.4x 1.0x 0.9x 0.8x 8.9x 7.5x 8.3x 3.5x 3.0x 2.1x 6% 7% 8%

FCF yieldP/E (cal) Cons implied target PE (cal) EV/sales (cal) lease adj. EV/EBITDA (cal) EV/GCI (cal)

Europe

US

Asia

Luxu

ry a

nd P

rem

ium

Bra

nds

Dep

artm

ent s

tore

sA

ppar

el R

etai

lers

Asia

US

Asia

Europe

US

August 4, 2011

Prada SpA (1913.H

K)

Goldm

an Sachs Global Investm

ent Research

11

Exhibit 20: Global Luxury Margin

Source: Company data, Goldman Sachs Research estimates

CY10 CY11 CY12 CY13 CY10 CY11 CY12 CY13 CY10 CY11 CY12 CY13 CY10 CY11 CY12 CY13Prada 67.5% 69.9% 71.3% 72.4% 25.7% 28.5% 30.0% 31.2% 19.9% 23.0% 24.3% 25.2% 18.4% 22.4% 24.1% 25.3%Burberry 65.4% 66.3% 66.8% 67.2% 21.1% 23.9% 25.0% 25.8% 17.2% 19.9% 20.8% 21.5% 19.0% 20.4% 21.0% 21.6%Hermes 66.8% 68.3% 68.5% 68.8% 31.7% 33.8% 34.0% 34.3% 27.8% 30.3% 30.5% 30.8% 27.5% 31.1% 31.5% 31.9%LVMH 64.6% 65.8% 66.0% 66.3% 24.4% 26.9% 27.1% 27.3% 20.5% 22.8% 23.2% 23.4% 19.9% 22.5% 23.0% 23.4%PPR 50.9% 48.5% 48.6% 48.7% 13.5% 14.3% 15.7% 16.4% 10.5% 11.3% 12.7% 13.4% 7.4% 10.0% 11.7% 12.8%Richemont 63.3% 64.5% 65.2% 65.7% 23.3% 26.3% 27.5% 28.1% 18.9% 22.0% 23.2% 23.9% 16.3% 21.5% 23.4% 24.1%Swatch 75.9% 76.7% 77.2% 77.7% 27.1% 28.2% 28.8% 29.6% 23.5% 24.6% 25.2% 26.0% 22.9% 25.8% 26.3% 26.9%Tod's 41.1% 43.3% 44.0% 44.4% 23.9% 26.4% 27.4% 27.8% 19.8% 22.7% 24.0% 24.7% 20.3% 22.9% 24.2% 24.9%Luxottica 65.7% 66.2% 66.9% 67.4% 17.8% 19.1% 20.1% 20.9% 12.3% 13.6% 14.5% 15.3% 10.4% 12.2% 13.5% 14.6%Average 62% 63% 63% 64% 22% 24% 25% 26% 18% 20% 21% 22% 17% 20% 21% 22%Coach 72.9% 72.6% 72.5% 35.2% 35.1% 35.4% 31.9% 32.1% 32.6% 31.9% 32.1% 32.6%Polo Ralph Lauren 58.5% 57.6% 57.2% 57.2% 17.9% 17.5% 17.3% 17.7% 14.8% 14.5% 14.5% 15.0% 14.5% 14.2% 14.3% 14.8%Tiffany 58.9% 59.4% 59.5% 59.6% 24.3% 25.3% 25.4% 25.5% 19.5% 21.0% 21.4% 21.7% 18.0% 19.8% 20.2% 20.7%Average 63% 63% 63% 58% 26% 26% 26% 22% 22% 23% 23% 18% 21% 22% 22% 18%Belle International 55.3% 55.3% 52.7% 52.9% 19.4% 21.0% 22.0% 23.0% 16.5% 18.1% 19.1% 20.1% 17.4% 18.7% 19.8% 20.8%TrinityHengdeliL'OccitaneAverage 55% 55% 53% 53% 19% 21% 22% 23% 16% 18% 19% 20% 17% 19% 20% 21%

Macy's 40.7% 40.5% 40.5% 40.6% 12.2% 12.8% 12.9% 13.0% 7.5% 8.5% 8.9% 9.0% 5.4% 6.8% 7.4% 7.6%Nordstrom 39.1% 39.3% 39.3% 39.3% 14.8% 14.9% 14.9% 15.1% 11.4% 11.7% 11.8% 12.0% 10.1% 10.6% 10.7% 11.1%Saks 39.8% 40.7% 41.0% 41.3% 7.9% 8.8% 9.1% 9.7% 3.6% 4.9% 5.5% 6.3% 1.6% 3.3% 4.3% 4.8%Average 40% 40% 40% 40% 12% 12% 12% 13% 8% 8% 9% 9% 6% 7% 7% 8%Golden Eagle Retail Group 78.0% 77.1% 72.8% 70.5% 55.7% 53.8% 52.9% 53.9% 50.9% 49.0% 47.6% 47.6% 52.9% 50.0% 48.4% 48.2%Maoye International 65.6% 64.5% 62.2% 60.5% 49.5% 47.6% 49.1% 49.3% 39.9% 39.4% 39.3% 37.5% 36.7% 33.4% 33.1% 32.4%Lifestyle International 57.5% 57.7% 58.1% 58.7% 40.7% 42.3% 42.9% 42.2% 35.8% 37.8% 38.5% 37.4% 43.9% 40.5% 41.5% 40.6%Parkson Retail Group 74.3% 75.2% 71.2% 68.9% 37.5% 35.8% 33.5% 34.1% 33.4% 31.7% 29.8% 30.8% 30.4% 30.3% 28.7% 30.2%New World Department stores 83.2% 82.4% 82.4% 37.1% 33.1% 34.2% 26.8% 23.1% 24.2% 41.1% 31.1% 25.6%Intime Department Store 74.2% 70.5% 67.2% 65.3% 38.3% 38.6% 38.5% 38.2% 27.9% 29.3% 28.8% 27.5% 40.5% 36.0% 36.3% 36.0%Average 72% 71% 69% 65% 43% 42% 42% 44% 36% 35% 35% 36% 41% 37% 36% 37%

Gross Profit Margin EBITDA Margin EBIT Margin PTP Margin

Asia

Dep

artm

ent s

tore

s

Asia

US

Luxu

ry a

nd P

rem

ium

Bra

nds Europe

US



The opportunity: Luxury Goods, a trillion dollar industry by 2025?

We believe the market for luxury goods could grow by 3.8x to reach US$1 trillion by 2025.

In our report of June 2, 2010, A trillion dollar global industry by 2025?, we discussed how

demand is likely to be boosted by the significant growth in the middle class in emerging

economies – especially China.

The drivers of economic growth are shifting from the developed markets to the emerging

markets. With global growth led by the BRIC economies (Brazil, Russia, India and China),

our Economists expect global GDP to grow 86% between 2010 and 2025 and for the BRIC

economies to contribute 58% of the total growth. Luxury goods sales have historically

grown at a consistent multiple of global GDP. They expect the global middle class (those

with incomes greater than US$30,000) to grow by 664 mn by 2025 (CAGR 5.1%) and for

China to lead this growth (+193 mn). We also identify a strong relationship between

growth in the middle class and middle class spend per head on luxury goods.

BRICS driving global growth

Our Economists expect China to account for two-thirds of the BRICs growth mentioned

above, or around 40% of the global total to 2025. They expect the middle class in these

countries to grow significantly, which we believe will drive the consumption of premium

products and luxury goods. In our view, the leading luxury goods brands such as Prada

and Miu Miu will benefit from this trend.

Exhibit 21: 60% of HNWIs* live in Europe and North

America; in Latin America the numbers are rising fast HNWI population, million people

Exhibit 22: The majority of HNWIs* live in developed

countries but they are increasing fast in BRIC countries HNWI population, million people

*HNWI = high net worth individuals Source: World Wealth Report 2010.

Source: World Wealth Report 2010.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2006 2007 2008 2009

Africa Middle East Latin America

Asia‐Pacific Europe North America

9.510.1

8.6

10.02866

1650

861

477 448 383251 179 147 143 118 127 63 79

0

500

1000

1500

2000

2500

3000

3500

USA

Japan

Germ

any

China

UK

France

Canada

Italy

Brasil

Spain

Russia

India

UAE

HK

2009 2008



The role of Japan and the underpenetrated China

The luxury goods market is estimated (Chevalier and Lu Luxury China: Market

Opportunities and Potential John Wiley & Sons, 2010) to have reached sales of US$265 bn

in 2008, with the largest single market, Japan, accounting for c.40% of global sales, or

US$106 bn. The US is the second largest market, with sales of US$53 bn in 2008 or 20% of

the total, and Europe the third with US$45 bn or 17%.

In contrast, China, was ‘only’ a US$15 bn market in 2008. We estimate that the global

luxury goods market has grown 2.2x since 1995, at a 4.2% CAGR, with Japan and the Rest

of the World (ROW) contributing the most – Japan an additional US$67 bn sales at a 6.6%

CAGR and RoW US$44 bn at a 22% CAGR. Within luxury goods, the ready-to-wear market

is estimated, by the same study, to be a US$30 bn market and the leather goods market to

be worth US$24 bn.

Exhibit 23: Japan is the largest luxury goods market Global luxury goods market US$265 bn, 2008

Exhibit 24: Spirits & champagne: Biggest single categoryCategory breakdown of global luxury goods market, %

Source: Chevalier and Lu “Luxury China: Market Opportunities and Potential” John Wiley & Sons, 2010.

Source: Chevalier and Lu “Luxury China: Market Opportunities and Potential” John Wiley & Sons, 2010.

Income growth and size of the middle class key drivers of luxury

goods sales

Annual per capita spending on luxury goods is currently US$170 in the US and US$834 in

Japan, while the global average is US$38, on our estimates. Spending in China is

currently US$11 per capita. Despite being a US$15 bn market in 2008, on a per capita

basis China is an underpenetrated luxury goods market and is to date showing more

similarities to Japan than the US. We estimate that despite China being a small luxury

goods market relative to its overall GDP, the Chinese middle class is spending more than

the Japanese on a per capita basis.

Growth in the global middle class has been a driver of growth for the global luxury goods

industry. We estimate that in emerging markets, luxury spend per individual earning a

middle class income is high relative to the world average. We estimate that spend per

head is US$1650 in China, US$1,440 in Japan and US$680 in Russia relative to a global

average of US$420 per middle class consumer. Hence, we believe that the rapid growth in

those earning above US$30,000 will be a key driver of growth for the luxury goods market

and that China will be the largest luxury market by 2018.

US

20%

Europe

17%

Japan

40%

China

6%

RoW

17%

Ready-to-

wear

11%Leather

Goods

9%

Fragrances

and

cosmetics

16%

Spirits and

Champagne

40%

Watches

6%

Jewellery

15%

Others

3%



Exhibit 25: China to contribute 193 mn (of 644 mn)

additional middle class population by 2025 Number of individuals with income greater than US$30,000

(million)

Exhibit 26: China middle class already has a high

propensity to spend, similar to the Japanese consumer Luxury goods sales per capita with income greater than

US$30,000 in 2008

Source: Goldman Sachs Global ECS Research.


Exhibit 27: China to take 33% share, Japan to fall to 13%

share by 2015 from 40%

Exhibit 28: China underpenetrated; our scenario sees

China develop like Japan

Luxury goods sales per capita (y-axis) vs. GNI per capita

(x-axis), US $


Source: Goldman Sachs Research estimates, World Data Bank.

Exhibit 29: Asia (ex Japan) and Americas fastest growthLuxury goods worldwide, composition, € bn

Exhibit 30: China growth potential remains significant GS estimates for Luxury category sales, US$ bn

Source: Altagamma.


599

1263

2540 10

19325

61

310

200

400

600

800

1000

1200

1400

2010 Brazil Russia India China Japan US RoW 2025

Europe, 203

US, 300RoW, 345

Brazil, 415

Russia, 679

Japan, 1436

China , 1650

0

200

400

600

800

1000

1200

1400

1600

1800

Luxury sales per capita with income > US$30,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Global Luxury Goods market geographic mix, %

US ($ bn) Europe ($ bn) Japan ($ bn) China ($ bn) RoW ($ bn)

US 1995 Luxury spend

per capita US $ 131

Japan 1995 Luxury spend per

capita US $ 312

US 2009 Luxury spend

per capita US $ 174

Japan 2009 Luxury spend per

capita US $ 790

China 2025 Luxury spend per

capita US $ 226 estimates

0

100

200

300

400

500

600

700

800

900

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

Does China Luxury follow Japan or America?

China '09

Luxury spend

per capita

CAGR

09‐05

YoY

09‐08

YoY

10E‐09

10% 0% 12%

13% 10% 23%

‐4% ‐12% 0%

‐3% ‐14% 16%

2% ‐9% 0%

0

20

40

60

80

100

120

140

160

180

200

2005 2006 2007 2008 2009 2010E

RoW

Asia (ex Japan)

Japan

Americas

Europe

147160 170 166 172

153

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025



Please note the Altagamma and Goldman Sachs estimates of the market size for luxury

goods and corresponding growth rates are independent of each other and should not be

considered comparable.

Exhibit 31: Hard luxury and leather goods fastest growth Luxury goods worldwide, composition, € bn

Exhibit 32: RTW and leather goods 9% pa growth GS estimates for Luxury category sales, US$ bn

Source: Altagamma.


Is the middle class the best definition of the luxury consumer?

We estimate that the luxury goods market, as defined by the categories of luxury or

premium products that we examine, extends its reach well beyond any definition of the

affluent. We believe that many “luxury” or “premium” price products are accessible to

the middle class. Hence, we believe growth in the addressable market for luxury goods

companies will come from growth of the super rich and also of the middle classes.

We believe that medium-term demand and supply factors favour leather goods, RTW,

watches and origin-protected spirits, given the:

democratization of “luxury”;

premiumization of “staples”; and

purchasing power of the emerging market affluent.

Middle class to drive discretionary spending. As households become more affluent,

their discretionary spending power also increases. Those with incomes between

US$6,000 and US$25,000 spend c.35% of their income on products and services that are

classified as non-necessities. For those earning over US$25,000, some 75% of their

income is spent on discretionary consumption (source: The coming of age: China’s new

class of wealthy consumers, McKinsey).

Exhibit 33: Ready-to-wear and leather goods remain “luxury” categories

Examples of entry point and average product and price point by category

Source: Compiled by Goldman Sachs Research.

CAGR

09‐05

YoY

09‐08

YoY

10E‐09

‐3% ‐1% 9%

0% 5% 4%

1% 9% 21%

6% 11% 17%

‐1% 5% 10%

0

20

40

60

80

100

120

140

160

180

200

2005 2006 2007 2008 2009 2010E

Other

Perfume and cosmetics

Hard Luxury

Leather, Accessories & shoes

Apparel

147160 170 166 172

153

0

20

40

60

80

100

120

140

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

inU

S$bn

Ready to wear Leather Goods

ASP Entry ASP Entry US$ point US$ point

Watches 150 Rotary Mens Quartz 47 Casio Mens Sports Watches 7000 Rolex Watch 1614 Rado Mens Bracelet Watch

Jewellery 180 Swarovski Pendant Necklace 80 ck Calvin Klein ring 6460 Cartier Bracelet 574 Bulgari B Zero Ring

Leather Goods 208 Guess Medium Handbag 70 Fiorelli Medium Handbag 2125 Louis Vuitton Bag 466 Burberry Leather Drawstring Tote

Ready-to-wear 130 Levis 501 Jean 36 Primark casual dress 1736 Chloe Cotton and Silk Dress 244 Dolce and Gabbana Jeans

Champagne 52 Moet et Chandon 36 Jacquart Brut NV 228 Louis Roederer Cristal 52 Moet et Chandon

Spirits 44 Jack Daniels Whiskey 23 Plymouth Gin 157 Remy Martin Cognac 78 Chivas Regal 18yr

Cosmetics 43 Paco Rabanne Aftershave 20 Quiksilver Eau de Toilette 143 Chanel No 5 spray 100 ml 50 Gucci by Gucci Eau de Parfum

Fragrances 23 L'Oreal day skin care 10 Maybelline Lipstick 45 Yves Saint Laurent foundation 14 Mac lipstick

Mass Market Luxury Goods

August 4, 2011

Goldman Sachs Global Investment Research

Exhibit 34: We estimate that the listed lux

outpace the market and grow 16% pa… GS estimates for luxury goods sector growt


Barriers to

entry remai

Our June 2,

heritage as

believe that

significant c

Exhibit 36: Category analysis of supply fa

Source: Compiled by Goldman Sachs Research.

0

100

200

300

400

500

600

700

800

CY

199

3

CY

199

4

CY

199

5

CY

199

6

CY

199

7

CY

199

8

CY

199

9

CY

200

0

CY

200

1

CY

200

2

CY

200

3

CY

200

4

CY

200

5

CY

200

6

CY

200

7

Luxury (bo ttom up )

13.8%annual growth 7.5% annual growth

+

Constraint to growth Supply constraints

Fragrances and cosmetics

Least Preservatives, natural

products, technical

personnel

ChampagneWhiskey, Cognac, Win

Leather Goods

Tannery and

manufacturing

capacity in Italy and

France

Watches

Spirits Brand stretch Leather Goo

Ready-to-wearCotton, global brand

stretchJewellery

Champagne, Whiskey, Cognac, Wines

Reserves Ready-to-we

Jewellery

Precious gems,

diamonds,

manufacturing

capacity

Fragrances acosmetics

Watches MostMovements and

manufacturing

capacity constraints

Spirits

SUPPLY CONSTRAINTS

+

xury sector can

th

Exhibit 35: … relative to Altaga

5%-6% pa Altagamma market estimates for

Source: Altagamma.

entry: Competitive positioning of incumbents is at

n high for most categories, and the emergence of loca

, 2010 report, A trillion dollar global industry by 2025?

one of the more attractive segments from a competitiv

t in RTW and leather goods segments, a global networ

cost and brand barrier to entry.

actors: Watches, leather goods and jewellery are prefe

CY

200

8

CY

200

9

CY

201

0

CY

201

1

CY

201

2

CY

201

3

CY

201

4

16%annual growth

=Strength of

competition for International

brands

Emerging competition and barriers to entry

International brands & heritage

e,

nesLeast

Appellation d'origine

contrôlée

Scotch Whisky Act

Often origin of

production. Perrier-Jouet

est. 1811, Bushmills est.

1608, Remy Martin est.

1724

Watches Mo

"Swiss made"

watches, 50% of total

value of manufacture

must be Swiss

Vacheron Constantin est.

1755, TAG Heuer est.

1860 and Rolex est. 1905

Leather Goods

ods Made in Italy

Hermes est. 1837, Louis

Vuitton 1854 and Gucci

est. 1921

Jewellery

Less branded industry

than watches

Chaumet 1780, Cartier

est. 1847, Boucheron

1858 and Bulgari est.

1884

Champagne, Whiskey, Cognac, Wines

ear

Fashion, Chambre

Syndicale de la Haute

Couture. Changing

fashions and local

taste.

Chanel ets. 1909,

Christian Dior ets. 1946

and Givenchy est. 1952

Ready-to-wear

and Local tastes and local

brandsGuerlain est. 1828

Fragrances and cosmetics

MostLocal tastes and

heritage brandsSpirits

COMPETITIVE POSITIONING OUTLOOK R

=

Prada SpA (1913.HK)

16

mma’s growth estimate of

luxury goods sector growth

tractive. The barriers to

al competition takes time.

highlighted brands with

ve standpoint. We also

rk of stores acts a

erred segments

Sales Margins

st positive

Least

RELATIVE TO GLOBAL INDUSTRIES



The “Great Luxury Mall of China”

In our March 4, 2011 report, A multi-year opportunity delivering market-leading growth,

investment and returns, we assessed the scope for multi-year outperformance in the

European luxury goods sector. Here, we focused on the re-deployment of cash by sector,

and the potential resulting impact on growth, margins and returns. We expect €3 bn of

cash to be invested over the next five years, focused on the continued roll-out of store

networks. We estimate that, on average, the brands in our sample can grow their

networks more than ten-fold. We expect this to contribute to the €38 bn of sales growth

we forecast for the sector over the next five years.

China has just started to buy luxury: 200 mn more consumers, 84 cities and another 6,000+ stores by 2025E

We expect China to remain the engine of luxury goods growth, as consumption’s share of

domestic GDP rises (from 36.3% vs. the US’s 70.8%) and urbanization gathers pace. As a

result, we see scope for material increases in luxury goods store networks in the country.

Luxury goods companies are present in only 46 cities (out of 89). In the major Tier 1 city

centres, luxury brands have on average only three points of sale (vs. 10 per brand in

Tokyo, six in Paris and five in London). We see room for an additional 6,000+ stores in

China by 2025, 228 per brand on average. We highlight that Louis Vuitton currently

achieves sales of US$379 mn from 39 stores in Greater China.

Exhibit 37: Many brands focus on just Hong Kong,

Beijing, Shanghai % of total China stores in Hong Kong, Beijing and Shanghai,

including Hong Kong

Exhibit 38: Luxury mono-brand store penetration tends

to increase with wealth and population, implying under-

penetration of China GDP per capita (US$) vs. number of luxury stores (by city)


Source: Li & Fung, Goldman Sachs Research estimates.

The great (luxury) mall of China: How €3 bn of cash can be redeployed … at a 19%

return on cash invested

The luxury goods sector currently has high levels of cash (0.2x 2010 net debt/EBITDA vs.

1.1x net debt/EVEBITDA historically (2000-09). We expect management to redeploy cash

and invest for growth. In an industry currently generating a 19% return on cash invested,

this points to significant growth potential. We believe the main focus of this investment

will be store network growth globally. We also examine regional differences in gross

margins, and the differences in retail and wholesale margins. We expect the shift to Asia

and retail-led models to see operating margins for our coverage to increase to 24.2% by

2014 (from 20.8% today).

100%

50%

87%

65%

44%

56%

45% 44%

11%

40% 38%

25%

38%

30%

17%

50%

7%

33%29% 28%

15%20% 19%

13%

20%23%

17%23%

18%13%

18%

11%

25%

10%

19%

23%

11%

32%

13%13%

19%

13%

10%

15%

14%

14%10%

19%15%

19%

16%

11%10%

13%8%

11%

15%8%

11%

25%

13%

19%

19%

22%

9%

16%

26%

13%17%

19%

13%

15%

19%

29%

17%

7%10%

11% 10%6%

12% 10% 7%9% 8%

7%9%

8%

6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

% of China stores in HK % of China stores in Beijing % of China stores in Shanghai

0

50

100

150

200

250

300

0 10000 20000 30000 40000 50000 60000 70000

Num

ber

ofst

ores

US$GDP per capita vs. Luxury store numbers

Beijing

Shanghai

Chongqing

Milan

London

Paris

Hong KongTokyo

New York



Exhibit 39: International brands have aggressively

expanded in Tier 2 and 3 cities, mainly on the east coastNumber of POS by city (2010), excluding Hong Kong

Exhibit 40: Room to expand relative to other brands

Luxury goods companies, stores in Mainland China, 2010

Source: Company data as at March 2011; rightsite.asia; chinaeconomicreview.com


A global industry set for growth: 16% pa sales growth to 2014E and increasing investment at a 19% CROCI

Relative to other global sectors, the luxury goods sector saw only a pause during the

global downturn of 2008-09. As global growth returns, we expect the global luxury

industry to begin a renewed secular growth phase, and forecast average sales growth for

our coverage of 17% in 2011 (vs. the European luxury market average of 16% and vs.

averages for the sector of 7.5% through 2004-07 and 13.8% through 1993-2000).

Luxury entering a growth phase again

Global luxury sales in 2010 were 16% (€9 bn) above the 2008 level, as the luxury industry

suffered no material impact during the global downturn. The luxury industry has

historically experienced long growth cycles (we identify 1993-2000 and 2004-07) and we

see 2011 and beyond as a continuation of the cycle.

Start of a new investment cycle for the luxury goods sector

We believe management will redeploy cash that has built up across the sector and invest

in growth. We believe high cash balances will be used to:

Increase capex – We forecast capital expenditure will increase to 7% of sales in 2011,

vs. the historical (2000-09) average of 6%, and will grow 42% yoy in 2011; this

compares with the Prada Group, where we forecast capex to grow 32% in the year to

January 2012 to represent 10% of sales.

Increase cash returns to shareholders – We forecast an increase of 2.8 pp in 2011.

Increase M&A (not applicable to Prada).

We estimate that 60%-80% of the luxury sector’s capex is on network growth, and

we expect a renewed focus on building out store networks in 2011 and beyond.

Global luxury brands: The competitive advantage

The luxury goods industry is dominated by a relatively small number of brands that share

several characteristics that create a meaningful barrier to entry while providing a platform

for outsized growth. The common characteristics of these global luxury brands are: (1)

heritage, (2) strength in multi-categories, (3) a global store network, and (4) global brand

recognition. The benefits to the brand owner can most easily be demonstrated in the

scale benefits of: (1) obtaining prime real estate and store locations, (2) scale in

106 3 4 3 2

45

3 3 3 52

21

1 2 11

2

1

35

27

25 16

71

1

1

2

Burberry Gucci LV Dior Prada Chanel Miu Miu

Beijing Shanghai Shenzhen Guandzhou Tier 2 Cities Tier 3 cities

14

4

35

40

17

8

0

5

10

15

20

25

30

35

40

45

Prada Miu

Miu

LV Gucci Hermes Chanel



communication, including the procurement of traditional media, and (3) global brand

recognition, which is increasingly important as many more luxury consumers also travel

internationally and as digital marketing and recognition increases its importance. A

shared strategic characteristic of these brands is that they have, and continue to take

further, control of the supply chain through increased sales through directly operated

stores, relative to sales generated through wholesale. This allows for greater control of

the brand, customer experience and, crucially, for the full capture of the margin

opportunity.

According to a study by Altagamma, the global luxury brands of scale or, so called,

‘power brands’ are luxury brands that have: (1) a global presence, (2) an extensive retail

network, and (3) a high relevance in the leather goods, shoes and accessories product

categories. Luxury “power” brands including Prada have average annual sales of c.

€1.8 bn at retail value.

Lack of an established distribution network presents a barrier to entry for potential

entrants as there is intense competition for prime locations for directly operated stores, as

well as access to wholesale distribution outlets. Established luxury brands are able to

secure prime locations which allows them to maintain their exclusivity and preserve their

prestige and identity. Particularly in China, the global luxury brands are significantly

better positioned than smaller players in their ability to obtain the best locations. Both

brand positioning and continuous and timely refurbishment of a brand’s retail network

are strategically important means to convey the desired brand image to consumers.

Luxury brands and the opportunity to roll out store networks

As discussed in our March 4, 2011 report, A multi-year opportunity delivering market-

leading growth, investment and returns, we believe that the luxury goods industry is set

to embark on a period of outsized growth, and that to capture this growth the industry will

commit to significant growth in the embedded store network on a global basis. Although

we see the most significant opportunity for store expansion to be in the growth markets,

in particular China, opportunities remain to build out store networks in developed markets,

particularly as the importance of the wholesale distribution channel diminishes. Prada

remains under-represented on a global basis relative to other global brands. The Prada

brand has 207 stores globally (vs. Louis Vuitton’s 451 and Gucci’s 317). The Miu Miu

brand being less mature has the potential to grow its store network at a relatively faster

rate, from 71 today. In China, the relative under-representation is more notable, with the

Prada Group running 14 Prada and four Miu Miu stores (vs. Louis Vuitton’s 35 and Gucci’s

40). Management expects to add c. 80 stores pa over the next three years worldwide

(from 319 today).

Luxury retail leads sales growth; margin and returns accretive

Furthermore, we believe the economics of generating sales through a directly operated

network of stores can be accretive to sales, margins and returns on capital invested. This

is particularly the case in two core markets: China and the US. In the former, the

availability of suitable retail space combined with the attractiveness of the global luxury

brands to shopping mall developers has meant that the capital cost and rental structures

are more favourable to running stores in China than any other major market. We believe

that while the payback on investment can be as high as three years in traditional markets,

many luxury brands are generating a payback of less than 12 months; hence store

openings are often accretive to growth and returns in months rather than years. In the

latter market, the luxury “power” brands continue to look to change their relationships

with the dominant department store channel.

Increasingly, brands such as Prada are being able to transfer their business from a

traditional wholesale relationship to one where the brand owner directly operates a shop



within the department store. Again, this expansion of margins comes at a relatively low

capital commitment.

Prada sales, in our view, should continue to grow rapidly

We believe that Prada will benefit from a number of growth drivers over the next few

years. These four areas represent the key performance indicators for the company.

Continuing to expand the DOS (directly operated store) network – we

forecast sales from DOS to increase to 84% of net sales in FY2014 from 71% in

FY2011. This is driven by the 80 store pa expansion plans over the next three

years. We expect the 14% annual growth from additional space to be

complemented by 10% like for like sales growth. At the same time, we expect the

Prada Group to continue to selectively reduce wholesale accounts mainly in

Europe and the US; we forecast a 4% average annual decline in wholesale

revenues in the period FY2011-14, to reach €538 mn in FY2014 (this follows a 10%

annual decline in the period FY2009-11).

Strengthening global coverage – we forecast sales from Asia ex-Japan to

increase to 44% from 32% of net sales on a sustained 30% top-line CAGR

(FY2011-14).

Capture the strong growth potential of Miu Miu – we forecast Miu Miu sales

to increase to €718 mn in FY2014 from €353 mn in FY2011, at a 27% CAGR, to

represent 21% of net sales (from 17%). We forecast this growth to be supported

by a more than doubling of stores to 189 from 77.

Continue to improve margins and profitability – we forecast EBITDA margins

to expand to 31.3% in FY2014 from 26.2% in FY2011 and that this will support a

33% CAGR in net income.

Exhibit 41: Asia to become largest market by FY2014E Asia Pacific (ex-Japan) as % of total net sales

Exhibit 42: Retail revenues to reach 84% of net sales DOS as % of total net sales



0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2009 2010 2011 2012E 2013E 2014E

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2009 2010 2011 2012E 2013E 2014E



Exhibit 43: Miu Miu to double revenues, to account for

21% of net sales by FY2014E Miu Miu as % of total of net sales

Exhibit 44: EBITDA margins to improve to above 30%

EBITDA (€ mn) and margin (FY2009-14E)



0%

5%

10%

15%

20%

25%

2009 2010 2011 2012E 2013E 2014E

283 290

536

715

893

1091

0%

5%

10%

15%

20%

25%

30%

35%

0

200

400

600

800

1000

1200

2009 2010 2011 2012E 2013E 2014E

EBITDA EBITDA margin



Prada Group snapshot by brand, geography, category and channel

Prada’s business can be described through four categorizations, by brand, category,

geography and channel.

Exhibit 45: Prada Group sales have grown 8% pa since

2005 Prada Group sales, € mn and % growth pa FY05-FY2014E

Exhibit 46: Prada Group EBIT has grown 34% pa since

2005 Prada Group EBIT, € mn and % margin pa FY05-FY2014E



Brand analysis: Prada and Miu Miu

The Prada and Miu Miu brands generated €1,969 mn of revenues and €531 mn of EBITDA

in FY2011. This represented 96% and 99% of the group total. Prada is the more

established brand, having been founded in 1913, and has a global network of 207 stores.

Miu Miu was established in 1993 and is less mature than Prada, but has reached a scale

that has seen its growth outpace the Prada brand for the last two years.

Exhibit 47: Prada and Miu Miu generate 96% of revenues

Sales mix by brand, FY2011

Exhibit 48: Miu Miu the fastest growing brand in the

group Sales mix progression



-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

0

500

1000

1500

2000

2500

3000

3500

4000

Sales growth

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

0

100

200

300

400

500

600

700

800

900

1000

EBIT growth

Prada, 79%

Miu Miu,

17%

Church's,

3%

Car Shoe,

1%Others, 0%

79% 79% 79% 78% 77% 76%

15% 16% 17% 19% 20% 21%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012E 2013E 2014E

Prada Miu Miu Church's Car Shoe Others



Prada brand

The Prada brand was created in 1913 by Mr Mario Prada and has since become one of the

most widely recognized brands in the fashion and luxury goods industry. The Prada brand

grew top-line 30% in FY2011 and generated total revenues of €1,615 mn. As of January 31,

2011, Prada had a sales network of 207 DOS and more than 700 wholesale clients

(representing approximately 1,000 doors) worldwide, among which there were 19 DOS in

Italy, 46 DOS in the rest of Europe, 26 DOS in North America, 43 DOS in Japan and 73

DOS in Asia Pacific.

Leather Goods. These account for 50% of Prada brand sales, €786 mn, and grew

42% in FY2011. The Prada brand originated with leather goods, and now mainly

includes handbags, travel bags and accessories, such as leather gloves, wallets,

key rings, belts and other leather accessories. The brand is recognized with its

trademark triangular Prada logo or the Prada “Savoy coat of arms”. Two of

Prada’s best known ranges are its black nylon items made from a waterproof

nylon fabric, which are also offered in different colors, shapes and sizes, and the

“Saffiano” leather handbags and accessories.

RTW. This category accounts for 26% of Prada brand sales, €420 mn, and grew

21% in FY2011. It comprises Prada-branded ready-to-wear for both women and

men. The womenswear collection was launched in 1988 and menswear collection

in 1993.

Footwear. Accounting for 23% of Prada brand sales, €366 mn, this category grew

23% in FY2011. Prada brand women’s footwear was first introduced in 1982 and

men’s footwear was introduced in 1993 along with its first men’s ready-to-wear

collection.

Miu Miu

Named after Ms Miuccia Prada, the President of the Prada Group, Miu Miu was created in

1993 as a separate womenswear focused brand that has since evolved into a leading high

fashion brand. The group has made major efforts since 2005 to enhance the Miu Miu

brand’s independent identity. This has included moving Miu Miu’s commercial

headquarters into a historic building in Milan separate from Prada’s offices, moving Miu

Miu’s fashion shows from Milan to Paris, and eliminating the men’s collection to focus on

building the brand’s image.

The Miu Miu brand grew top-line 40% in FY2011 and generated sales of €353 mn. As of

January 31, 2011, Miu Miu had a global sales network of 71 DOS and 300 wholesale

clients (representing almost 500 doors), including eight DOS in Italy, 18 DOS in the rest of

Europe, seven DOS in North America, 13 DOS in Japan and 25 DOS in Asia Pacific.

Leather Goods. These make up 64% of Miu Miu brand sales, €224 mn, and grew 45%

in FY2011. The Miu Miu leather goods, including handbags and accessories such as

wallets, belts and gloves, constitute the majority of the brand’s sales.

RTW. This category accounts for 18% of Miu Miu brand sales, €63 mn, and grew 36%

in FY2011. Miu Miu’s ready-to-wear collections for women were first introduced in

1993.

Footwear. Accounting for 18% of Miu Miu brand sales, €64 mn, this category grew

27% in FY2011. Miu Miu women’s footwear is designed to complement the ready-to-

wear collections.



Church’s

A family-run business founded in 1873 in Northampton, England, Church’s has long been

a leader in men’s handmade luxury footwear. Prada acquired 100% control of Church’s in

May 2007 from Prada Holding B.V.

The Church’s brand grew 21% in FY2011 and generated sales of €53 mn. As of January 31,

2011, Church’s had a global sales network of 36 DOS and approximately 600 wholesale

clients (representing more than 700 doors), with seven DOS in Italy, 24 DOS in the rest of

Europe, one DOS in North America and four DOS in Asia Pacific.

Products. Church’s is most famous for its classic men’s leather shoes, which are

mainly handmade at its Northampton factory. Church’s also sells women’s shoes,

which are mainly manufactured at one of the group’s manufacturing facilities in Italy

where some of the Prada-branded shoes are also produced. In addition to shoes,

Church’s offers leather goods for both men and women, such as briefcases, wallets

and document holders, and a small line of ready-to-wear for men, such as raincoats,

shirts, neckties and socks, which are outsourced and licensed to third-party producers

in the UK. Church’s also offers “made-to-order” shoes and a shoe repair service.

Car Shoe

Car Shoe was founded in 1963 and specializes in luxury driving shoes. Prada completed

the acquisition of 100% of Car Shoe in June 2010.

Car Shoe brand revenues declined 3% in FY2011 and generated sales of €18 mn. As of

January 31, 2011, Car Shoe had a global sales network of five DOS and approximately 280

wholesale clients (representing more than 300 doors), with three DOS in Italy, one DOS in

Hong Kong and one DOS in Singapore.

Products. Car Shoe offers luxury driving shoes with rubber studded soles. In recent

years, Car Shoe has developed new footwear models which are available for men and

women in a wide range of colors and leather materials in both classic and modern

design variations. The Car Shoe product range has been extended to other leather

goods, such as bags and accessories.

Exhibit 49: Price and style positioning, Prada and Miu Miu have higher fashion content

and a more exclusive positioning


Classic Contemporary Fashion

Acc

essi

ble

Asp

irat

iona

lA

bsol

ute

Church's

Car Shoe

Prada

Miu Miu



Exhibit 50: Leather goods the largest category at the

Prada brand… Prada brand, FY2011

Exhibit 51: … as is the case at Miu Miu

Miu Miu, FY2011



Exhibit 52: Prada brand to grow an average 17% pa to

reach €2.6 bn sales (FY2011-14E) Prada sales progression, € mn

Exhibit 53: Miu Miu to grow an average 27% pa to reach

€720 mn sales (FY2011-14E) Miu Miu sales progression, € mn



Clothing

26%

Leather

goods

50%

Footwear

23%

Others

1%

Clothing

18%

Leather

goods64%

Footwear

18%

Others

0%

0

500

1000

1500

2000

2500

3000

FY

09

FY

10

FY

11

FY

12E

FY

13E

FY

14E 0

100

200

300

400

500

600

700

800FY

09

FY

10

FY

11

FY

12E

FY

13E

FY

14E



Prada and Miu Miu: Competitor analysis

Prada operates within the luxury goods market alongside other global brands including

Armani, Chanel, Christian Dior, Hermes, Louis Vuitton, Gucci, Bottega Veneta and YSL.

Prada and Miu Miu have the highest worldwide recognition of the group’s brands.

Absolute sales, absolute profit. The Prada Group generated €2.1 bn of revenues in

FY2011 and €536 mn of EBITDA. This compares to Louis Vuitton Fashion and Leather

Goods €7.6 bn and €2.6 bn (EBIT), Gucci Group €4.0 bn and €897 mn (EBITA) and

Hermes €2.4 bn and €762 mn (EBITDA).

Exhibit 54: Prada is one of the largest leading luxury

companies… Sales, 2010 (€ mn)

Exhibit 55: … yet it currently generates lower margins

than best-in-class EBIT 2010 (€ mn)



Absolute sales to Asia ex-Japan, and % of total sales. Prada Group sales to Asia

ex-Japan were €646 mn in FY2011 and represented 32% of sales. Louis Vuitton and

Gucci have higher absolute sales to the region, at €2.2 bn (30%) and €1.2 bn (30%)

respectively. However, as a proportion of revenues this is one of the highest among

the luxury peer group, with only Gucci 34% and the hard luxury Richemont 34% and

Swatch 44% having greater sales exposure to the fastest growing region for luxury

goods.

Category split: Leather goods sales and as % of sales. The Prada Group generates

€1.0 bn of revenues from leather goods, or 50% of group sales. This compares most

closely to Gucci (€2.2 bn and 55%) and Hermes (€1.2 bn and 50%).

Store network – globally and in Asia, absolute and growth. The Prada brand has

207 stores globally, less than many of the other leading luxury brands. LVMH Fashion

and Leather 1,188 (Louis Vuitton brand 451) and Gucci Group 684 (Gucci brand 317)

have significantly more stores. In Asia ex-Japan, the under penetration is all the more

stark, 73 vs. Louis Vuitton brand 93 and Gucci brand 110. We note the Miu Miu is a

maturing brand with great potential to grow stores, currently 71 globally and four in

Mainland China. In terms of store growth, Prada is more active, having added 30

stores in FY2011 and planning 80 stores in FY2012-14. This compares to LVMH

Fashion and Leather 24 (Louis Vuitton brand five) in 2010, likewise Gucci Group 75

(Gucci brand 34) in 2010.

Channel mix: Retail as % of sales. The Prada Group generates 71% of sales from its

own retail network. Some brands are fully vertically integrated, notably Louis Vuitton

with c.95% of sales generated through its own retail network. Prada is closer to Gucci

(73%) and Hermes (77%) and is ahead of brands such as Tods (51%), Burberry (63%)

and the hard luxury companies Richemont (50%) and Swatch (17%).

0

1000

2000

3000

4000

5000

6000

7000

8000

0%5%10%15%20%25%30%35%40%

0

500

1000

1500

2000

2500

3000

EBIT EBIT margin



Exhibit 56: Prada Group brands compete in five core segments Category analysis of major luxury brands

Source: Goldman Sachs Research based on Altagamma data.

Exhibit 57: Prada could increase its retail mix Luxury goods companies, wholesale-retail split, last reported

Exhibit 58: Prada and Miu Miu both under-represented in

store numbers Total number of DOS by brand



Exhibit 59: Prada has a high proportion of sales from Asia

Luxury goods companies, regional split, 2010

Exhibit 60: Prada has a high proportion of sales from

leather goods Luxury goods companies, product split, 2010



Leather

goods

Women's

shoes

Men's

shoes

Women's

RTW

Men's

ApparelSilk Underwear Perfumes

Hard

Luxury

Prada

Miu Miu

Church's

Car Shoe

Armani

Burberry

Calvin Klein

Chanel

Christian Dior

Coach

Dolce & Gabbana

Gucci

Hermes

Hugo Boss

Louis Vuitton

Polo Ralph Lauren

Most significant Least significant

71%

~95%

73% 77% 63% 51% 50%

17%

29%

~5%

27% 23% 23% 23% 23%

23%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Wholesale Retail

207

71

451

317

193175

148 145

0

50

100

150

200

250

300

350

400

450

500

Prada Miu Miu Louis

Vuitton

Gucci Hermes Dior Bottega

Veneta

Chanel

32% 30% 36%26% 20% 28%

18%27% 25%

13%34%

44%

42%29%

30%38% 54%

51% 75%

35% 45%43%

41%

45%

11%

16%12% 19%

10%

19%8%

12%

15%18% 18% 16%

17%

11% 7%13%

28% 44%

14% 8%0% 7% 4% 1% 9% 7%

‐6%

0% 0% 2%

‐20%

0%

20%

40%

60%

80%

100%

Prada Group

LVMH Fashion

Gucci

Herm

es

Arm

ani

Dior

Tod's

Bulgari

Burberry

Pandora

Richemont

Swatch

Asia (ex Japan) Europe Japan North America RoW

24%

59%

14%30%

13%

50%55%

50%

16%

25%

14%

72%6%

8% 8%

7%

25%6%

1% 3% 9% 6%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Prada

Arm

ani

Gucci

Herm

es

Tod's

RTW Leather Shoes Hard Luxury Eyewear P&C Other



Geographical analysis: Growth markets the focus

Prada Group is well exposed to the growth markets for luxury goods, notably Asia ex-

Japan, which represents 32% of net sales and on our forecasts will account for 43% of

sales by FY2014. We forecast Asia ex-Japan to be the fastest growing region in FY2011-14,

expanding at 30% pa. We expect revenues from the other major regions to grow at an

average of 14% pa.

Exhibit 61: 32% of sales generated from Asia ex-Japan…Sales mix by geography, FY2011

Exhibit 62: … set to grow to 42% of sales by FY2014E Sales mix progression by geography



Exhibit 63: Sales in Asia to increase 400% FY2009-14E…

Prada Group sales in Asia (ex Japan), € mn

Exhibit 64: … from a low base to grow to €925 mn in

China Prada Group sales in Mainland and Greater China, € mn



Italy, 19%

Europe,

22%

North

America,

15%

Asia-Pacific,

32%

Japan, 11%Others, 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012E 2013E 2014E

Italy Europe North America Asia-Pacific Japan Others

0%

10%

20%

30%

40%

50%

60%

70%

0

200

400

600

800

1000

1200

1400

1600

2009 2010 2011 2012E 2013E 2014E

A-Pac sales Growth

0

100

200

300

400

500

600

700

800

900

1000

2009 2010 2011 2012E 2013E 2014E

Mainland China Hong Kong / Macau



Category analysis: Leather goods to outpace

The Prada Group is well exposed to one of the fastest growing segments for luxury goods,

leather goods, which represents 50% of net sales and on our forecasts will represent 53%

of sales by FY2014. We estimate growth in the leather goods segment at 9.4% pa to 2015,

relative to overall luxury market growth of 9% pa. We expect leather goods to be the

fastest growing category in FY2011-14 for Prada Group, with top-line expansion at 20% pa.

We expect the other major categories, RTW and footwear, to grow revenues 17% and 15%

pa, respectively.

Exhibit 65: Ready-to-wear and leather goods to grow ahead of the wider luxury sector

Luxury sales growth by category, 1995 to 2025, US$ bn


Exhibit 66: Leather goods 50% of sales…

Sales mix by product line, FY2011

Exhibit 67: … and to remain the fastest growing segment

Sales mix progression



13

31

115

11

25

95

0

20

40

60

80

100

120

140

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

in U

S$

bn

Ready-to-wear Leather Goods

Growth rates, CAGR, %

'95-'10 '10-'25EGlobal 5.8% 9.0%

Luxurysales

Ready-to 5.6% 9.2%

-wear

Leather 5.9% 9.4%

goods

RTW, 24%

Leather

goods, 50%

Footwear,

25%

Others, 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012E 2013E 2014E

RTW Leather goods Footwear Others



Exhibit 68: For Prada Group, leather goods, RTW and footwear are by far the most significant product categories


Core Non‐core

Product category

RTW

Leather, shoes & other accessories

Watches, jewelry & writing instruments

Perfume & cosmetics

Art de la table

Others

Womenswear

Menswear

Underwear

Leather goods

Women's shoes

Men's shoes

Silk accessories

Watches

Jewelry

Writing instruments

Lighters

Perfume

Cosmetics

Eyewear

Core

Core

License

License

Product category Segments Presence of Prada Group Prada division



Other categories: Eyewear and fragrances

Eyewear. Prada entered into a licensing agreement with Luxottica in 2003 for the

production and worldwide distribution of eyewear products under the Prada and Miu Miu

trademarks for a term of ten years up to December 31, 2013. Prada, through its licence

agreement with Luxottica, sells 2.5 mn units pa. Luxottica has an option exercisable prior

to December 31, 2012 to renew the license agreement for an additional term of five years

to December 31, 2018. Prada generated €24 mn in royalties from this license agreement in

FY2011.

Fragrances. In 2003, Prada also granted a worldwide exclusive licence agreement to

Fragrance and Skincare S.L., a joint venture established with Puig, a major cosmetics

company in Spain, for the production and worldwide distribution of fragrances and

cosmetics under the Prada trademark for a term of 15 years. In February 23, 2011, the JV

was disposed by Prada and became a wholly owned subsidiary of Puig. Prada received

€3.5 mn proceeds for the disposal. The licence agreement was amended for a term of ten

years starting January 31, 2011, and is subject to a further 10 years’ automatic renewal.

Prada generated €4 mn in royalties from this licence agreement in FY2011.

Sales by gender

On a global basis, we estimate that Prada is split 70:30 between womenswear and

menswear. However, we believe that in China this is closer to 50:50.

Exhibit 69: RTW to grow 16% pa to €757 mn

Clothing sales progression, € mn

Exhibit 70: Leather goods to grow 22% pa to €1,836 mn

Leather goods sales progression, € mn



Exhibit 71: Footwear to grow 14% pa to €745 mn Footwear sales progression, € mn

Exhibit 72: Other products to grow 7% pa to €23 mn Other product lines sales progression, € mn



0

100

200

300

400

500

600

700

800

2009 2010 2011 2012E 2013E 2014E0

200

400

600

800

1000

1200

1400

1600

1800

2000

2009 2010 2011 2012E 2013E 2014E

0

100

200

300

400

500

600

700

800

2009 2010 2011 2012E 2013E 2014E 0

5

10

15

20

25

2009 2010 2011 2012E 2013E 2014E



Channel analysis: Retail core to growth strategy

The mix of the business continues to shift to retail, away from wholesale, as Prada

management continues to expand the store network while actively reducing the

wholesale business in some core markets. We expect this trend to continue.

Retail. Retail revenues accounted for 71% of total sales in FY2011, having grown from

54% of sales in FY2009 at an average rate of 28% pa to FY2011. This growth has been

driven in part by the opening of an additional 82 stores (FY2009-11) combined with

double-digit LFL sales growth. We forecast that the addition of 80 stores pa in FY2011-14

will contribute to growth from new space of 16% pa which, when complemented by 10%

LFL growth, will lead to Retail generating 86% of total revenues by FY2014.

Wholesale. Concurrently, we expect wholesale revenues to continue to decline, with the

number of franchised stores falling from 33 to 23 (FY2011-14E) and the number of

wholesale doors continuing to fall (having been reduced by 20% over the last three years).

Wholesale revenues were 29% of sales in FY2011, €590 mn, and have declined by an

average 10% pa since FY2009. We expect this trend to continue with sales falling 6% pa to

reach €482 mn by FY2014E.

E-commerce. The Prada Group currently generates less than 1% of net revenues from e-

commerce. We expect rapid growth in this channel, although we expect sales to remain

below 10% of net revenues during the forecast period.

Exhibit 73: Retail accounts for 71% of total sales…

Sales mix by distribution network, FY2011

Exhibit 74: … and we expect this to grow to 86% by

FY2014 Sales mix progression by distribution network



Exhibit 75: Retail sales to grow 26% pa to reach €2.9 bn

DOS – outlets included, nos

Exhibit 76: Wholesale revenues to decline 4% pa

Independent clients, franchises and relative parties, nos



DOS, 71%

Wholesale,

29%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012E 2013E 2014E

DOS Wholesale

0

500

1000

1500

2000

2500

3000

3500

2009 2010 2011 2012E 2013E 2014E

0

100

200

300

400

500

600

700

800

2009 2010 2011 2012E 2013E 2014E



Growth strategy: Rolling out the store network

Key to Prada’s growth strategy is its plans to accelerate store openings to 80 stores pa in

FY2011-14. We believe the 14% pa space growth should allow the Prada Group to grow

faster than its luxury peers during the forecast period.

Split by brand, the group expects to open the same number of Prada and Miu Miu stores.

By region, the Prada Group expects to open 25 stores pa in Asia ex-Japan (30 in Greater

China over the next three years), approximately 25 in the Middle East and around 15 in

Russia over the next three years. In total, we estimate that the split of store openings

could be 40 stores pa in growth markets and 40 stores pa in traditional markets.

We summarise the store growth opportunity below by type of market and by brand.

Type of market:

Growth markets: We forecast that the majority of the store openings for the

group will be in Asia Pacific, 30 openings pa.

New markets: Prada intends to open stores in the Middle East, Brazil, India and

Indonesia.

US: Prada continues its strategy of replacing the wholesale network in the US

with directly operated stores. In FY2011, it opened a net 13 new stores in the US.

We forecast 15 new stores pa in the US, in the period FY2011-14 from both

brands, to reach a network of 79 stores by FY2014.

Europe: In a similar fashion to the strategy employed in the US, Prada continues

to reduce the number of wholesale accounts. Whereas in the US, the transfer

from wholesale to retail does not mean a change in physical location, rather a

different contractual agreement with the department stores, in Europe the

strategy will be based on opening new stores to replace the wholesale business

in select locations.

By brand:

Prada brand. The store concept is iconic green wall and ceiling and checkered

marble flooring within flagship stores. We forecast a net 38 new store openings

pa to grow the network to 333 stores in FY2014E (from 207 at year-end FY2011).

Miu Miu. The store concept is based on contrasting classic materials, such as

golden damask, with modern futuristic elements. We forecast a net 38 new store

openings pa to grow the network to 189 stores in FY2014E (from 71 at year-end

FY2011).

Church’s. We forecast a net two new store openings pa to grow the network to

42 stores in FY2014E (from 36 at year-end FY2011).

Car Shoe. We forecast a net one new store opening pa to grow the network to

nine stores in FY2014E (from five at year-end FY2011).



Prada brand and Miu Miu under-penetrated relative to luxury peers

Exhibit 77: Prada Group under-represented in stores in

Asia… Luxury goods companies, stores in Asia ex-Japan, 2010

Exhibit 78: … and Mainland China…

Luxury goods companies, stores in Mainland China, 2010



Exhibit 79: … and in Europe… Luxury goods companies, stores in Europe inc Italy, 2010

Exhibit 80: … and in North America Luxury goods companies, stores in North America, 2010



73

25

93

110

64

38

0

20

40

60

80

100

120

Prada Miu

Miu


14

4

35

40

17

8

0

5

10

15

20

25

30

35

40

45

Prada Miu

Miu


65

26

105

7970

51

0

20

40

60

80

100

120

Prada Miu

Miu


26

7

129

64

33 31

0

20

40

60

80

100

120

140

Prada Miu

Miu




Prada brand compares favourably on capex and sales per store

Exhibit 81: Prada capex per store below other brands…

Capex per new store, € mn

Exhibit 82: … but revenue per store is similar to the

average Sales per store, € mn



Store growth to be led by Prada and Miu Miu, particularly in Asia

Exhibit 83: 319 DOS at January 31, 2011…

Stores by brand and geography, FY2011

Exhibit 84: … to grow to 569 in FY2014E

Stores by brand, FY2011

Source: Company data


Exhibit 85: DOS to open in growth and mature markets Stores by geography

Exhibit 86: The majority of the openings in Asia Net store openings by geography



0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Tod's Burberry Prada Bulgari Hermes LVMH

fashion

and

leather

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Burberry Tods Bulgari Prada Hermes LVMH

fashion

and

leather

2619

46

73

43

78

18

25

13

17

24

4

3

2

0

20

40

60

80

100

120

N A

meri

ca

Italy

Eu

rop

e

Asia

-Pacif

ic

Jap

an

Prada Miu Miu Church's Car Shoe

154 166 177207

251292

3332736

51

71

109

147

185

2834

34

36

38

40

42

22

3

5

7

8

9

0

100

200

300

400

500

6002008

2009

2010

2011

2012E

2013E

2014E

Prada Miu Miu Church's Car Shoe

28 31 31 37 40 43 4649 63 73

88 108 128 148

1920 21

3449

6479

6472

87

104

134

164

194

5152

53

56

58

60

62

0

100

200

300

400

500

600

2008

2009

2010

2011

2012E

2013E

2014E

Italy Europe North America Asia-Pacific Japan

3 06 3 3 3

14

10

15 20 20 20

1

1

1315 15 15

815

17

30 30 30

1 1

3

2 2 2

0

10

20

30

40

50

60

70

80

2009

2010

2011

2012E

2013E

2014E

Italy Europe North America Asia-Pacific Japan



Luxury stores: The opportunity for the Prada Group in China

Compared with other luxury and consumer brands in China, Prada’s and Miu Miu’s store

growth opportunity stands out. The Prada Group operates 14 Prada stores and four Miu

Miu stores in Mainland China. This compares to Louis Vuitton’s 35, Gucci’s 40, Alfred

Dunhill’s 91 and Burberry’s 50.

Prada’s stores are also concentrated in the three major centres of Beijing, Shanghai and

Hong Kong (over 60% of Prada’s stores and 75% of Miu Miu’s stores). Many other luxury

brands, including the global luxury brands, have a more diverse geographical spread of

sales. Luxury brands have increasingly identified opportunities to grow outside the major

centres into Tier 2 and 3 cities. For example, Gucci has less than 50% of its stores in

Beijing, Shanghai and Hong Kong, while Louis Vuitton has 84% of its store network

outside these three cities. We believe this represents an opportunity for the Prada Group,

particularly when considering that the global luxury brands often open stores in clusters

and are encouraged, through incentives, to do so by real estate or mall developers.

On a global basis, Prada also has a relatively low proportion of stores in Greater and

Mainland China relative to its global network, with only 6% of its network in China. A re-

balancing to increased stores in China and additional stores outside the Tier 1 cities will

see Prada moving more in line with its closest peers.

Exhibit 87: Prada the clear laggard to luxury “power”

brands in Mainland China…

No. of stores in mainland China

Exhibit 88: … and the current network heavily skewed to

Beijing, Shanghai and Hong Kong

% of total China store network in Beijing, Shanghai and HK

Source: Company data, Goldman Sachs Research estimates (for collection of store numbers, where not officially disclosed).


77

58 58

49 48 46

40

34 33 3128 28 26

21 20 19 17 16 15 15 14 13 12 129 7 4 4 2 2 1

0

10

20

30

40

50

60

70

80

90

Fo

lli Fo

llie

Alf

red

Du

nh

ill

Hu

go

Bo

ss

Ferr

ag

am

o

Cerr

uti

Bu

rberr

y

Mo

ntb

lan

c

Lo

uis

Vu

itto

n

Cart

ier

Arm

an

i

Gu

cci

Co

ach

Lan

cel

To

d's

Herm

es

Vers

ace

Ken

zo

Fen

di

Bo

tteg

a V

en

eta

Tif

fan

y

Pra

da

Giv

en

ch

y

Do

nn

a K

ara

n

Bu

lgari

Ch

loe

Ch

an

el

Bale

ncia

ga

Miu

Miu

YS

L

Ralp

h L

au

ren

Ro

ger

Viv

ier

100%

50%

87%

65%

44%

60%

45% 44%

11%

40%38%

25%

35%30%

17%

50%

7%

33%29% 28%

15%20% 19%

13%

20%23%

17%23%

18%13%

18%

11%

25%

10%

19%

23%

11%

32%

13%13%

19%

13%

10%

15%

14%

14%10%

19%15%

19%

16%

11%10%

13%

8%

11%

15%8%

11%

25%

13%

19%

19%20%

9%

16%

26%

13%17%

19%13%

15%

19%

29%

17%

7%10%

11% 10%6%

12% 10% 7%9% 8%

7%9%

8%

6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

% of China stores in HK % of China stores in Beijing % of China stores in Shanghai



Exhibit 89: Prada has 6% of its stores in Mainland China

2010

Exhibit 90: Prada is well represented in major global

centres 2010



Exhibit 91: Luxury Goods in Mainland China – store locations


14.8%

11.9%

10.5%

7.2%6.8%

5.9% 5.6%

4.1%3.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%To

d's

Ric

he

mo

nt

Bu

rbe

rry

Gu

cci g

rou

p

Pra

da

He

rme

s

Miu

Miu

Bu

lga

ri

LV

MH

78

65

11

3 33 3

5

2

4

0

2

3

6

5

2

10

3 3

0

2

4

6

8

10

12

New York Paris London Milan Tokyo Beijing Shanghai

Prada Miu Miu Average no. of stores per brand

Prada LV Bulgari Chanel Tod's Tiffany Piaget Versace Chloe Bally Kenzo

Folli

Follie Hermes

Bottega

Veneta Fendi

Jean

Paul

Gaultier

Beijing x x x x x x x x x x x x x x x x

Shanghai x x x x x x x x x x x x x x x x

Dalian x x x x x x x x x

Guangzhou x x x x x x x x x

Shenzhen x x x x x x x x x x x x

Chengdu x x x x x x x x x x x x x x

Xiamen x x

Xian x x x x x x x x x

Hangzhou x x x x x x x x x x x x x

Qingdao x x x x x x x x x

Wenzhou x x x x

Kunming x x x x x x x x

Shenyang x x x x x x x x x x x x

Nanjing x x x x x x x x x

Tianjin x x x x x x x x x x x x

Sanya x x

Changchun x x x x x

Suzhou x x x x x x x x x x x

Changsha x x x x x x

Urumqi x x

Wuhan x x x x

Taiyuan x x x x x

Wuxi x x x x x x x x x

Harbin x x x x x x x x

Ningbo x x x

Hohhot x x x

Fuzhou x x x x x

Nanning x x x x

Zhenzhou x x x x x

Chongqing x x x

Changzhou x x

Guiyang x

Jinan x x

Yantai x

Yiwu x

Shijiazhuang x

Taizhou (Zhejiang)

Anshan x

Ordos x

Tangshan x

Urumqi x



Exhibit 92: Asia Pacific to see store growth of 90

Stores by geography, 2011-2014E

Exhibit 93: Prada to add 126 stores, Miu Miu 114 stores

Stores by brand, 2011-2014E



Profit drivers: Mix analysis, margin initiatives and leverage

As well as benefitting from strong growth in global luxury markets, as outlined

earlier, we see scope for the Prada Group to outperform through the acceleration of

the store roll-out programme, not only to grow revenues but also to expand

margins and returns. We forecast the Prada Group to generate EBITDA margins and

ROCE above 30% by FY2014E (from 26.2% and 27.7%, respectively, in FY2011).

Luxury retail leads sales growth: Margin and returns accretive

The luxury goods sector has been through a process of vertical integration whereby an

increasing proportion of revenues are being generated through directly operated stores

relative to the traditional wholesale accounts.

As we highlighted in our March 4, 2011, report, A multi-year opportunity delivering

market-leading growth, investment and returns, we believe the economics of generating

sales through a directly operated network of stores can be accretive to sales, margins and

returns on capital invested.

Retail-led growth a preferred strategy for the brands that can

For the brand owner, the benefits of a strategy to increase sales through directly operated

stores relative those generated through franchise stores or wholesale are:

control of brand;

control of markdown;

control of customer experience;

stores act as an effective brand extension and marketing tool; and

full capture of the retail margin, which can be 20%-40% depending on the product

line, category or geography.

569

319

960

45

90

640

0

100

200

300

400

500

600

2011

Italy

Eu

rop

e

No

rth

Am

eri

ca

Asia

-Pacif

ic

Jap

an

Oth

ers

2014E

565

319

126

114

6 4

0

100

200

300

400

500

600

2011

Pra

da

Miu

Miu

Ch

urc

h's

Car

Sh

oe

2014E



Exhibit 94: We believe that variances in regional pricing…

Luxury average selling price, Europe indexed to 100

Exhibit 95: … drive higher gross margins in Asia…

Average retail gross margin by region, %



Exhibit 96: … higher retail gross margins…

Average gross margin by channel, %

Exhibit 97: … have helped lift industry gross margins

Luxury goods sector gross margins, %



100

105

140

134

114

60

70

80

90

100

110

120

130

140

150

Europe US Japan China Other

Average selling price

64.6%

73.8%

75.0%

66.5%

69.2%

68.3%

58.0%

60.0%

62.0%

64.0%

66.0%

68.0%

70.0%

72.0%

74.0%

76.0%

Europe Asia Pacific Japan Americas Other Top down

Retail gross margin, %

68.2%

59.6%

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

68.0%

70.0%

Gross margin mix

Retail vs. wholesale gross margin, %

62.8%

63.0%

63.4%

63.8%

64.2% 64.2%

65.4%

65.7%

66.1%

66.4%

66.8%

60.0%

61.0%

62.0%

63.0%

64.0%

65.0%

66.0%

67.0%

68.0%

2004 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E



Prada Group: Operating margins to be driven up by positive mix,

scale and organic initiatives

We identify three key levers for Prada's operating margin progression:

Improving mix of the business by channel, region and geography (FY2009-11

+360bp, FY2011-14E +380bp).

Organic initiatives and leverage (FY2009-11 +400bp, FY2011-14E -20bp).

Scale benefits at Miu Miu (FY2009-11 +140bp, FY2011-14E +140bp).

Prada Group to see a 14% increase in EBITDA margins FY2009-14E

In the period FY2009-11, Prada’s group EBITDA margin improved to 26.2% from 17.2%.

We estimate the three drivers described above contributed a respective 360bp, 400bp and

140bp to this margin improvement, respectively.

We estimate the EBITDA margin for the business will increase further, to 31.3% in FY2014

from 26.2% in FY2011, with the three drivers accounting for a respective 380bp, -20bp and

140bp. We note that our forecasts contain an element of conservatism about the

additional operating leverage in the business given we forecast additional depreciation

and advertising spending.

Exhibit 98: Prada to improve gross margins Gross and EBITDA margin over time

Exhibit 99: EBITDA margins to continue progression Changes to EBITDA margin, %, FY2009-14E

Source: Company data, Goldman Sachs Research estimates


(1) Improving Mix: Retail, Asia and Leather Goods (FY2009-11 +360bp, FY2011-14E

+380bp)

We believe that Prada can benefit from a number of favourable mix elements on the gross

and operating margins. We believe 363bp of EBITDA margin improvement in the period

FY2009-11 was due to the positive impact of changing mix, particularly as retail sales

have outpaced wholesale revenues. We expect this to continue and forecast a further

380bp expansion in the period FY2011-14E. We believe there are three key drivers of mix

improvements:

Channel mix – the most significant element of improving mix as higher gross

margin retail business replaces and outpaces lower gross margin wholesale

business.

Geographical mix – we believe that operations in Asia command higher gross

and operating margins due to the higher level of mark up and lower rent and

10%

20%

30%

40%

50%

60%

70%

80%

2009 2010 2011 2012E 2013E 2014E

Industry gross margin Prada gross margin Prada EBITDA margin

17%

26%

31%

1%

1%

0%

0%

4%

4%

10%

15%

20%

25%

30%

35%

2009 Miu

Miu

Organic

and lev

Mix 2011 Miu

Miu

Organic

and lev

Mix 2014E



personnel costs, so as this geography outpaces the rest of the world in terms of

the benefits from top-line growth.

Product mix – we believe that the gross margin in leather goods is above that on

footwear and RTW, and again Prada benefits as this category grows faster than

the others.

(2) Organic initiatives (markdown policy and cost restructuring) and operating leverage (FY2009-11 400bp, FY2011-14E -20bp)

Organic initiatives. We believe Prada has delivered improvements in the gross margin

by making changes to its markdown policy in its directly operated stores. The company

has reduced the amount of product subject to markdown and the average level of

discount offered. We estimate that this has added up to 190bp to the group gross margin

in the FY2009-11 period. We expect a, more limited, 85bp improvement in the FY2011-14

forecast period. Initiatives on cost restructuring and sourcing efficiencies have also

contributed to the organic improvements in gross and operating profit margins.

Operating leverage. We expect the Prada Group to continue to show operating leverage

on its cost base. We believe c.200bp of Prada’s EBITDA margin improvement in the

FY2009-11 period was due to the positive impact of operating leverage. We are more

cautious going forward and forecast that management will add to this cost base, most

notably to advertising and promotion costs that we forecast to increase to 8% of sales,

from 4.2%, and that this will dampen the positive impact from operating leverage in the

FY2011-14 period.

(3) Scale benefits at Miu Miu (FY2009-11 +140bp, FY2011-14E +140bp)

We expect EBITDA margins at Miu Miu to continue to improve. Since FY2009, the EBITDA

margin has improved to 21.8% from 12.5%. We believe that this is part reflects the

reaching of a maturity level on its operating cost base. We expect the Miu Miu brand

EBITDA margins to rise to 29.8% by FY2014E, relative to the Prada brand EBITDA margin

of 32.3% we forecast in that year.



Financials: Sector-leading growth, sector-catching margins

Prada Group’s net revenues grew to €2,046.7 mn in FY2011 (end-January) from €1,643.6

mn in FY2009, representing a CAGR of 11.6%. EBITDA in the same period grew to €535.9

mn from €282.6 mn (a CAGR of 37.7%), resulting in an improvement in the EBITDA

margin to 26.2% from 17.2%. We expect Prada to deliver sector-leading revenue CAGR of

19% (FY2011-14E), aggregate EBITDA margin improvement of 508bp and for this to

deliver a net income CAGR of 32%. The key drivers of earnings growth are: (1) retail-led

growth, driven by accelerated store expansions of 80 pa (and like for like sales), (2) rapid

growth of the Miu Miu brand, (3) margin accretion at the gross and operating margin level,

and (4) financial deleverage. Prada, we expect, can deliver on management’s expectations

of a 30% EBITDA margin, 30% net income CAGR and 30% ROCE by FY2014E.

Prada to deliver sector leading top-line growth rates

We forecast sales to grow to €3.4 bn from €2.0 bn (FY2011-14E) at a CAGR of 19%. We

expect this growth to be driven by a 25% CAGR in sales from DOS (16% new space and

9% LFL), partly offset by a 6% CAGR decline in wholesales revenues.

Recent record shows acceleration in growth rates…

In FY2011, Prada delivered top-line growth of 32% following a 4% decline in revenues in

the prior year. This growth was driven by a 44% increase in sales from DOS (vs. +14% in

prior year), broken down 13% from new space, 22% LFL and 9% positive currency. Sales

from the wholesale channel grew 9% (7% comparable currency) following the prior year

decline of 26%.

The Miu Miu brand grew fastest, up 40% in FY2011, followed by the Prada brand +30%,

Church’s +21% and Car Shoe -3%. By geography, the fastest growth region was Asia

Pacific, up 63% (+49% comparable currency), following 40% growth in the prior year. Asia

Pacific was followed by North America +29% (+21% comparable FX), Europe +21% (+19%

comparable FX), Italy +19% and Japan +17% (+3% comparable FX). By category, Leather

Goods grew 42%, Footwear 23%, RTW 22% and other categories 39%.

… and material improvements in operating profit margins

The Prada Group delivered a 538bp expansion in the gross margin in FY2011, following a

444bp increase in the prior year, lifting the group gross margin to 67.8% in FY2011 from

58% in FY2009. This margin uplift was driven by: (1) channel mix, (2) sourcing efficiencies,

(3) changes to the markdown policy, and (4) other/ currency. This gross margin

improvement helped deliver an increase in EBITDA margins to 26.2% in FY2011 from

17.2% FY2009. By brand, EBITDA margins have improved at Prada to 28.1% from 19.2%

over the same period, at Miu Miu to 21.8% from 12.5% and at the other brands to 6.4%

from 2.0%.

We expect a moderation in sales growth in FY2012 and further margin progression

We forecast sales growth to be moderate in FY2012. We forecast top-line growth of 20%,

driven by 29% growth in sales from DOS, broken down 19% from new space, 10% LFL

and 2% currency. We forecast sales from the wholesale channel to decline 2%. We

continue to expect the Miu Miu brand to grow the fastest, up 30%, followed by Prada

+19%, Church’s +5% and Car Shoe +5%. By geography, we expect the fastest growing

region to be Asia Pacific, up 34% (32% comparable currency) followed by North America

+17% (10% comparable FX), Europe +15% (15% comparable FX), Italy +15% and Japan

+4% (3% comparable FX). By category, we forecast Leather Goods to grow 21%, Footwear

17%, Clothing 20% and other categories 20%.



We forecast an improvement in gross margin of 220bp to 70% in FY2012E driven by

continued beneficial channel mix changes and some lagged beneficial impact from the

changes to markdown policy.

Store growth to drive sales growth

Management expects to open 80 net new stores pa. We have assumed that this is split

38:38:2:2 between Prada, Miu Miu, Church’s and Car Shoe. We forecast this additional

space growth to contribute 16% CAGR sales growth from new space to DOS revenues

from FY2011-14. By brand, this equates to 15% CAGR growth from net new space for the

Prada brand and 25% for Miu Miu. We expect new space growth to be supplemented by

LFL sales growth of 9% at both brands.

Asia (ex Japan) to deliver the fastest geographical growth

By region, we forecast a 30% CAGR in revenues over FY2011-14 in Asia (ex Japan), 13% in

Europe, Italy and North America, 8% in Other countries and 4% in Japan. We forecast that

these sales will be driven by the weightings of store openings where we estimate an

additional 90 stores in Asia Pacific (32% CAGR), 60 in Europe (17% CAGR), 45 in North

America (32% CAGR), 30 in Other countries (152% CAGR), nine in Italy (7% CAGR) and six

in Japan (3% CAGR). We forecast Asia Pacific sales to represent 43% of group sales in

FY2014E (from 32% in FY2011), Europe 19% (from 22%), Italy 17% (from 19%), North

America 13% (from 15%), Japan 8% (from 11%) and Other countries 1% (from 1%).

Miu Miu to outpace group sales growth

We expect Miu Miu to be the fastest growing brand and to deliver a CAGR of 27% to

FY2014E (33% increase in DOS revenues, 1% wholesale revenue growth). We expect the

Prada Group to grow revenues 17% CAGR (24% growth in DOS revenues offset by a 5%

CAGR decline in wholesale revenues). We forecast Church’s and Car Shoe to grow

revenues 5% CAGR. By FY2014E, we expect the Prada brand to represent 76% of total

revenues (from 79% in FY2011), Miu Miu 21% (from 17%) and the other brands 3% (from

4%).

Exhibit 100: Prada and Miu Miu dominate growth

Sales by brand (€ mn)

Exhibit 101: Asia Pacific (ex Japan) to drive regional sales

Sales by geography (€ mn)



500

1000

1500

2000

2500

3000

3500

4000

2009 2010 2011 2012E 2013E 2014E

Prada Miu Miu Church's Car Shoe Others

0

500

1000

1500

2000

2500

3000

3500

4000

2009 2010 2011 2012E 2013E 2014E

Italy Europe North America Asia-Pacific Japan Others



Exhibit 102: Prada the largest contributor to sales growth

Sales by brand, FY2011-14E, € mn inc Royalties

Exhibit 103: Asia Pacific the largest contributor to sales

Sales by geography, FY2011-14E, € mn, ex- Royalties

Source: Company data, Goldman Sachs Research.

Source: Company data, Goldman Sachs Research.

Exhibit 104: New space and LFL sales more than offset reduced wholesale revenues

Sales contributions (ex-Royalties), 2009-14E, € mn

Source: Goldman Sachs Research based on company data.

3405

2047

979

3669 3 1

0

500

1000

1500

2000

2500

3000

3500

4000

2011

Pra

da

Miu

Miu

Ch

urc

h's

Car

Sh

oe

Oth

er

bra

nd

s

2014E

3363

2017

186210

145

771

31 3

0

500

1000

1500

2000

2500

3000

3500

4000

2011

Italy

Eu

rop

e

No

rth

Am

eri

ca

Asia

-Pacif

ic

Jap

an

Oth

ers

2014E

1604

2017

3443

235

585

321

892

-143

-51

0

500

1000

1500

2000

2500

3000

3500

4000

2009

LFL

New

DO

S

Wh

ole

sale

2011

LFL

New

DO

S

Wh

ole

sale

2014E



Leather goods to be the fastest growing category

We forecast Leather Goods to continue to outpace the growth of the other categories,

growing at a CAGR of 22% (FY2011-14E), followed by RTW 17%, Footwear 15% and Other

7%. We expect Leather Goods to increase its share of total net revenues from 50% to 53%,

offset by RTW (24% to 23%) and Footwear (25% to 23%).

Exhibit 105: DOS growth to offset declining wholesale

Sales growth by channel

Exhibit 106: Leather Goods to grow fastest

Sales growth by category



Gross margins

We expect the group gross margin to expand to 72.5% from 67.8% (FY2011-14E) driven by

an improving mix of sales and organic initiatives, in particular due to markdown policy

changes. Retail gross margins are higher than wholesale margins and, as retail increases

its share of revenues (to 86% from 71%, on our FY2011-14 forecasts), we expect gross

margins to improve by up to 200bp. To a lesser extent, we believe that the higher gross

margin achieved on sales in Asia Pacific relative to the rest of the world could add 90bp

and finally Leather Goods, being of higher gross margin than other categories, will also

contribute 90bp to the gross margin.

Exhibit 107: Gross margin to break the 70% level

Gross margin, %

Exhibit 108: Mix the biggest driver of gross margin

Gross margin contributions



-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

2010 2011 2012E 2013E 2014E

DOS Wholesale

-20%

-10%

0%

10%

20%

30%

40%

50%

2010 2011 2012E 2013E 2014E

RTW Leather goods Footwear Other

50%

55%

60%

65%

70%

75%

2009 2010 2011 2012E 2013E 2014E

58.0%

72.5%

1.9%

0.9%

3.8%

0.0%

0.5%

0.0%3.6%

3.8%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

2009

Mark

do

wn

po

licy

So

urc

ing

eff

icie

ncie

s

Oth

er,

Fx

"Ch

an

nel"

mix

2011

Mark

do

wn

po

licy

So

urc

ing

eff

icie

ncie

s

Oth

er,

Fx

"Ch

an

nel"

mix

2014E

23%Retail 25% 27%



Exhibit 109: Changes to markdown policy Markdown, average discount and total gross margin, %


EBITDA margins

We expect EBITDA margins to improve to 31.3% from 26.2% (FY2011-14E), driven in the

most part by the gross margin initiatives. The four core areas of operating costs have a

degree of fixed cost element; hence, we expect the company to deliver some operating

leverage as the business grows:

product and development expenses;

advertising and promotion expenses;

selling expenses; and

general and administration expenses.

Exhibit 110: Sales and EBITDA to grow 19% and 26% pa

Revenue and EBITDA, € mn

Exhibit 111: Both brands to reach 30% EBITDA margin

EBITDA margin by brand, %



22% 16% 11%40% 35% 30%66.0%

66.5%

67.0%

67.5%

68.0%

68.5%

69.0%

69.5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Winter 2009/10 Mid 2010 Winter 2010/11% of product s.t. markdown % markdown

Total gross margin, %

1644 1561

2047

2466

2912

3405

283 290536

707877

1065

0%

5%

10%

15%

20%

25%

30%

35%

0

500

1000

1500

2000

2500

3000

3500

4000

2009 2010 2011 2012E 2013E 2014E

Revenues EBITDA EBITDA margin

19% 20%

28%30% 31% 32%

12%

17%

22%

25%

28%30%

2%

-2%

6%8%

11%12%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

2009 2010 2011 2012E 2013E 2014E

Prada Miu Miu Other brands



Exhibit 112: Prada Group cost structure

Costs and operating profit as % of sales, FY2011

Exhibit 113: We assume some operating leverage

Operating expenses, € mn



Currency

The Prada Group is net exposed to the US dollar, with 40% of revenue exposed, but only

20% of cost. As a result, a stronger euro presents a risk to margins; however, given

Prada’s flexible supply chain and significant pricing power, we do not see currency as a

major medium-term threat to margins. In the near term, rapid movements in currencies

do present a risk to margins. We expect the impact from currency to contribute to 2% to

the top-line in FY2012 and have no material impact on gross margins.

Exhibit 114: Weaker euro benefits Prada for income… Revenue and costs (costs of goods sold and operating costs)

by currency, FY2011

Exhibit 115: … and financial debt

Cash and debt by currency FY2011



Interest

We expect the Prada Group to be highly cash generative, on average generating average

free cash flow pa of €285 mn over the FY2011-14 period. As a result, we expect Prada to

de-lever from 1.6x net debt: EBITDA to net cash by FY2014. We expect the financial

expense to turn to a small income in FY2014E.

Cost of goods

sold, 32.2%

Product and

development

expenses,

4.7%

Advertising

and

Promotion

expenses,

4.2%

Rent, 14.4%

Other selling

expenses,

17.0%

General and

administration

expenses,

7.1%

EBIT, 20.4%

44%

45%

46%

47%

48%

49%

50%

51%

0

200

400

600

800

1000

1200

1400

1600

1800

2009 2010 2011 2012E 2013E 2014E

Product and development Advertising and Promotion

Selling General and administration

SG&A as % of sales

35%

62%

40%

20%

10%9%

15%9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Revenue Costs

Euro US dollar Japanese Yen Other

13%

78%57%

6%13%

15%17%

1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cash Debt

Euro US dollar Japanese Yen Other



Tax

We forecast the tax rate to fall to 31% in FY2014 from 35% in FY2011.

Dividends, capital expenditure and working capital

The company intends to pay a dividend, in line with industry practice: we assume a

payout ratio of 16% in FY2012E and 28% in FY2013E and in FY2014E.

Increasing inventories and payables, from managing an expanded store network, are

offset by decreasing receivables, from reduced sales to third-party wholesale accounts.

We expect working capital to remain below 15% of sales to FY2014E.

We forecast capital expenditure to increase 33% to €249 mn in FY2012 (from €188 mn in

FY2011) and to reach 10.1% of sales. In FY2013 and FY2014, we expect more modest

growth of 13% and 2%, respectively.

Exhibit 116: Capex to peak at 10.1% of sales in FY2012E

Capex progression, € mn

Exhibit 117: … and 75% to be focused on expanding retail

Capex progression, € mn



Cash flow and balance sheet structure

We expect the company to generate €236 mn, €337 mn and €480 mn of free cash flow pa

to FY2014E. We expect the company to be net cash by FY2013E.

Exhibit 118: Lower receivables offset higher inventory

days Working capital progression, € mn

Exhibit 119: Prada to have net cash by FY2013E

Net debt: EBITDA and covenants, € mn



7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

0

50

100

150

200

250

300

350

2009 2010 2011 2012E 2013E 2014E

CAPEX CAPEX as % of sales

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

0

50

100

150

200

250

300

350

2009 2010 2011 2012E 2013E 2014E

Corporate Industrial Retail CAPEX as % of sales

133 144 155 160 164 169

55 52 48 43 38 33

-120 -121 -128 -128 -128 -128

62

64

66

68

70

72

74

76

78

-150

-100

-50

0

50

100

150

200

250

2009 2010 2011 2012E 2013E 2014E

Inventory days Receivable days

Payable days Working capital days

544472

401

225

19

-304

3.9x

2.0x

0.9x0.4x

0.0x-0.4x

7.5x

1.7x2.3x 2.5x 2.6x 2.6x

-1.0x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

-400

-300

-200

-100

0

100

200

300

400

500

600

2009 2010 2011 2012E 2013E 2014E

Net Debt Net Debt/FFO Fixed charge cover



Returns

Prada generated a return on capital employed (ROCE) of 27.7% in FY2011 and cash return

on cash invested (CROCI) of 14.9%, up from 12.9% and 7.8%, respectively, in FY2009. We

forecast this progression to continue, with ROCE and CROCI forecast at 35.3% and 16.4%

in FY2014.

Intangibles. The Prada Group has €1.1 bn of gross value intangible assets on the balance

sheet (net carrying amount €0.9 bn). These intangibles have been generated through

three main transactions.

The acquisition of the Miu Miu brand from a related party in an arm’s length

transaction in 2003 with a cash outflow of €220 mn (current net book value of the

Miu Miu trademark €182 mn).

The acquisition of the Church’s brand for an initial consideration of €150 mn in

1999 (current book value of the Church’s trademark €111 mn).

The acquisition of the retail and wholesale businesses from the Prada Holding

company in an arm’s length transaction in 2002/03 with a cash outflow of

€500 mn (current net book value of goodwill related to this transaction €492 mn).

The implications for the calculation of cash returns (CROCI) is that Prada has lower cash

returns, 14.9%, than some of it global peers (the current sector average is 18%). However,

if this intangible were adjusted to reflect only transactions related to non-Prada and Miu

Miu brands, then returns (CROCI) would be 180bp higher at 16.7%, approaching the

average for the sector.

Exhibit 120: Prada to see returns improve…

CROCI, %, GCI and DACF, € mn

Exhibit 121: … to industry average

ROCE, %, EBIT and CE, € mn



288 397 656 785 965 1,163

3,096

3,545

4,391

5,228

6,136

7,085

9%

11%

15% 15%16%

16%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2009 2010 2011 2012E 2013E 2014E

Debt adj cash flow Avg Gross cash invested CROCI

191 187 418 571

711 860

1,485 1,520 1,512

1,832

2,132

2,441

13% 12%

28%

31%33%

35%

0%

5%

10%

15%

20%

25%

30%

35%

40%

-

500

1,000

1,500

2,000

2,500

3,000

2009 2010 2011 2012E 2013E 2014E

EBIT Average CE ROCE



Risks: Slower growth, rising costs, execution of growth strategy

Key risks to Prada’s strategy and growth potential include slowing global GDP,

availability of suitable real estate for store openings, fashion risk and margin

compression as fixed costs are added.

Expansion comes with risks in execution

An accelerated expansion plan comes with risk in execution. The ability to maintain a

pipeline of new real estate of appropriate sites will be critical to Prada’s ability to execute

its growth strategy.

Fashion risk and brand dilution

Fashion risk and brand dilution present risks, both in the near term in terms of the risk of

higher markdowns and in the medium term in terms of the sustainability of the growth of

the brands.

Problems with production or quality

Production is outsourced to third-party suppliers. Problems with production and quality of

the finished goods present a risk to sales and brand perception.

Costs: Negative operational leverage; adverse FX moves

As Prada increases the number of stores in its network, fixed costs will be added to the

operating cost base. This presents a risk to profit margins, especially if demand were to

fall dramatically. The management of currency moves also presents a risk, particularly

when the euro strengthens against the dollar.

The business relies on key personnel

The Prada business is critically dependent on Ms Miuccia Prada, who leads the design

function and is President and founder of the company. Mr Patrizio Bertelli, the Chief

Executive, is also critically important to the operations. The loss of either or both of these

personnel presents a significant risk to the business.

Tax disputes ongoing

Prada is subject to tax risks. A number of disputes, including two each in France and

Korea and one each in Japan and Germany in the last financial year and 18 in total in the

last three years, present a risk to earnings.

A downturn in the economy or consumer confidence

Global GDP, tourist, wealth, incomes and consumer confidence are all potential drivers of

luxury goods demand. A macroeconomic slowdown presents a risk to sales progression

for Prada.



Appendix 1: Company profile

Prada: A leading fashion and luxury goods group

Prada is one of the world’s leading fashion and luxury goods groups. It designs,

manufactures, promotes and sells high-end leather goods, ready-to-wear and footwear

through the Prada, Miu Miu, Church’s and Car Shoe brands.

Timeline and history

Prada SpA was established as a limited liability company (società a responsabilità

limitata) in Italy on July 11, 1990. On November 25, 2003, following a merger by

incorporation with other companies within the group, the company was transformed into

a joint-stock company (società per azioni) and took the current name of PRADA S.p.A.

The origins of the company date back to 1913 when Mr Mario Prada, the grandfather of

Ms Miuccia Prada, President, opened a store in Galleria Vittorio Emanuele II in the centre

of Milan that sold leather bags, trunks, beauty cases, luxury accessories and precious

objects such as silverware and Bohemian crystal.

The expansion of the group’s business began in the late 1970s when Ms Miuccia Prada,

who had just started to manage the group, and Mr Patrizio Bertelli, who at that time had a

business that operated in the high-end leather goods industry, started their collaboration.

Mr Patrizio Bertelli’s company, I Pellettieri d’Italia S.p.A. (later called Prada Industrial

S.p.A., which merged into the company in 2003), obtained a licence from Ms Miuccia

Prada for the production and distribution of a leather goods collection under the Prada

brand. The first Prada womenswear fashion show was held in Milan in 1988. In 1993, a

new brand – Miu Miu – was established. It was first licensed to the Prada Group by Ms

Prada but was acquired by the group in 2003. Miu Miu now offers women’s ready-to-wear,

leather goods and shoes, and is an increasingly important component of the group’s sales.

In the past seven years, the strategy has been to focus on the brands that management

believes have the greatest potential for growth, namely Prada and Miu Miu, and to

consolidate the distribution network. More recently, this strategy has included a corporate

reorganization programme designed to concentrate all of the operations in the company

and in subsidiaries that it controls directly. Accordingly, between 2006 and 2007, all of the

Italian industrial activities were merged into the company, with the exception of Artisans

Shoes srl in which the operating partners have kept a minority stake.

The acquisition and subsequent disposal between 1999 and 2006 of the Fendi, Jil Sander

and Helmut Lang brands (and their respective businesses) did not involve the group.

These transactions directly or indirectly involved the controlling entities at the time.



Exhibit 122: Prada history: Key timeline in development of the Prada Group


1913Mario Prada opens a luxury store in the Galleria Vittorio Emanuele II in Milan, selling leather handbags, travelling trunks, leather accessories and beauty cases, luxury accessories and articles of value.

1919 Prada became an official supplier to the Italian Royal Family.

1970s

The Group saw a turning point in the development of its activities when Miuccia Prada, Mario’s grand-daughter, launched a partnership with Patrizio Bertelli, a Tuscan businessman already involved in the leather goods sector under the brand names Granello and Sir Robert. This partnership combined creativity and business ideas to commence a new era.

1977

Patrizio Bertelli set up I.P.I. spa to consolidate the production resources that he had built up over the previous ten years, including those of Sir Robert and Granello. In the same year, I.P.I. spa obtained an exclusive license from Miuccia Prada to produce and distribute leather goods bearing the Prada brand name.

1979 Launch of Prada women’s footwear collection 1980 Design and launch of the first triangle1982 Launch of the first Prada women’s shoes collection1983 Opening of a second store in Via della Spiga, Milan 1984 Launch of the Prada black nylon backpack1986 First Prada stores opened abroad in Europe (Madrid) and the US (New York)

1988 Launch of the first Prada women’s ready-to-wear collection and first women’s fashion show in Milan

1993 A new brand, Miu Miu, was launched in 1993. 1993 Launch of Miu Miu women’s collections (ready-to-wear apparel, handbags and footwear)1993 Launch of the first Prada men’s collection (ready-to-wear and shoes)1997 Launch of the Prada leisure-time line, identifiable by its red stripe

1999 Prada acquired full control of Church’s Group, a prestigious brand of English shoes ($170mn)

2000 Launch of Prada eyewear collection (JV with De Rigo)2000 First Sponsorship of the Luna Rossa Challenge

2001 Prada, acquired control of Car Shoe, an Italian brand famous for exclusive driving shoes.

2001 Opening of the first “Epicenter” store in SoHo, New York

2003Prada entered into a ten-year licensing agreement with Italian eyewear manufacturer Luxottica, one of the world leaders in the eyewear industry. The Luxottica Group currently produces eyewear for the Prada and Miu Miu brands.

2003 Opening of the second “Epicenter” store in Aoyama,Tokyo 2003 JV with Puig Beauty for the fragrance lines 2003 IPI spa was merged into Prada spa.

2003 to 2006 Incorporation of companies belonging to the former Genny Group. The purpose of this step was to enhance Prada’s know-how and manufacturing capabilities in the women’s ready-to-wear sector.

2004 Opening of the third “Epicenter” store in Beverly Hills, Los Angeles 2004 Launch of the first Prada fragrance

July 2004 to June 2010 Acquisition of Car Shoe S.A. from the Moretti family2006 Miu Miu fashion show in Paris 2006 Prada launches its first men’s fragrance 2006 First Miu Miu fashion show in Paris

2006 to 2007

Incorporation of all the Italian industrial activities held by the company, with the exception of those where the operating partners held a minority stake. This process involved the merger into the company of 11 companies, which manufactured leather goods, ready-to-wear and footwear, for better organizational efficiency.

2007 Launch of first Prada phone by LG 2007 Launch of new Prada women’s fragrance, Infusion d’Iris 2007 Acquisition of 100% of Church’s from Prada Holding B.V.2008 Launch of Infusion d’Homme, the new Prada men’s fragrance 2008 Launch of the new Prada phone by LG.

2009Launch of exclusive new “Made to measure” (customized and made to measure men’s shirts) and “Made to order” (possibility to customize clothes, accessories and shoes) services available as part of a new concept at the store in Corso Venezia, Milan

2009 Launch of new Prada women’s fragrances Eau Ambrée and Infusion de Fleur d’Oranger 2010 Prada is an official partner of the Italian Pavilion at the Shanghai World Expo Jul-05 Launch of the “Prada Made in...” collection Jul-05 Launch of “Postcard” eyewear

2010 Prada dressed hostesses and stewards in the Italian pavillion at the Shanghai World Expo. Launch of the “Prada Made in ...” Project

2011 First Prada fashion show in BeijingJul-07 Disposal of Azzedine Alaïa S.a.S.

Dec-08 Acquisition of Post Development Corp (real estate company that owns the New York Headquarters of Prada) from the controlling company



Competitive strengths

A leading luxury group, underpinned by a long heritage. The company was

established in 1913 and is one of the most successful players in the luxury goods

industry with more than €2 bn of net sales.

A focus on innovation and quality. Examples of innovation with materials, design

and functionality include Prada nylon bags and backpacks and “Saffiano” leather

bags and accessories.

Strong brand portfolio. Prada, Miu Miu, Church’s and Car Shoe allow the company

to reach targeted complementary luxury audiences.

Stable and experienced management team. Experienced management and stable

teams headed by Ms Miuccia Prada and Mr Patrizio Bertelli, the controlling

shareholders with over 30 years of company leadership. Ms Prada has been widely

recognized as an influential figure in the fashion industry worldwide. Mr Patrizio

Bertelli has been leading the industrial and commercial infrastructure from the

perspectives of growth, expansion and financial performance.

Well-balanced and focused product portfolio. Leather goods, footwear and ready-

to-wear accounted for approximately 51%, 25% and 24% of total net sales (excluding

royalties), respectively, in FY2011. The wider range of products at the group’s DOS

increases cross-selling opportunities.

Direct control over the entire value chain. Prada has control over the technical

expertise, quality standards and production cost as well as maintaining a flexible

capacity. As of January 31, 2011, the group had approximately 1,800 employees in its

in-house production divisions and approximately 750 people in the product

development department.

Well diversified global presence with strong focus on Asian markets, particularly

Greater China. 42% of net revenues in Europe, 32% in Asia Pacific, 15% in North

America and 11% in Japan.

Strong network of DOS in prime locations. The company has expanded its network

of DOS from 211 at February 1, 2008 to 319 as at January 31, 2011. Sales from DOS

now represent 71% of total net sales, up from 54% for the year ended January 31,

2009. The extensive network allows greater control over interaction with customers

and allows the company to respond to customers in a more effective and timely

manner. Prada has been able to secure prime locations in prominent shopping malls

and streets globally. Management views increased sales from DOS as a key driver of

increased profitability. The Prada Group currently operates 18 outlet stores (12 in

Europe, three in the US and remainder in Asia). This represents under 6% of the total

store network and we expect this level to stay constant, relative to sales, as the

overall store network grows.

Recent track record of delivering growth and profitability, even in difficult

market conditions. Net revenues have grown to €2.0 bn in FY2011 from €1.6 bn in

FY2009, a CAGR of 11.6%. In the same period, EBITDA has grown to €536 mn from

€283 mn, a CAGR of 37.7%, and EBITDA margins have increased to 26.2% from 17.2%.

The key drivers of this profitability growth have been: (1) the increased contribution

from retail, (2) presence in high-growth markets, (3) production efficiency and (4) cost

management.



The Prada business model

Exhibit 123: Prada value chain


Design. The design process is intended to allow control over the technical expertise,

quality standards and production cost, while maintaining flexibility.

Design and creation. Prototypes and samples are produced at the in-house facility.

Detailed specification allows for control of design and cost. Design teams are headed by

Ms Miuccia Prada and Mr Fabio Zambernardi, the design director for both Prada and Miu

Miu. Design teams of 60 people are supported by the product development department of

750 people (responsible for transforming designs into prototypes). Prices are set post the

approval of the samples. Prada is opening two new design offices, in Paris and Hong

Kong, both under the supervision of the Milan headquarters.

For each of the three financial years ended January 31, 2009, 2010 and 2011, the

design and product and development expenses were c.€88.2 mn, €96.8 mn and

€97.2 mn, respectively, representing c.5.5%, 6.3% and 4.8% of net sales, respectively.

Sourcing and production. 11 in-house production facilities produce 20% finished product.

External manufacturers produce the remaining 80%. Prada works with 450 raw material

suppliers. Purchases are not concentrated: the top five account for 15% of the total. Prada

buys directly from the majority of its suppliers. The group works with 480 manufacturing

partners and maintains 170 staff in quality control. This method of production allows for

control of the value-added areas of the process while maintaining the flexibility to prevent

capacity shortages or constraints.

Communications and public relations. Fashion shows, advertising campaigns, events

and sponsorships. Fashion shows are a key communication - six pa, four Prada in Milan

and two Miu Miu in Paris. Prada has 11 main advertising campaigns pa (five for the Prada

brand, two for each of the other brands).

Advertising and promotion expenses were €99.5 mn in FY2009, €75.8 mn in FY2010

and €85.1 mn in FY2011, representing a respective 6.1%, 4.9% and 4.2% of net

revenues.

Sales and distribution. Directly operated stores, multi-brand department stores,

franchise stores and e-commerce.

Distribution. Retail. 71% of sales are through 319 directly operated stores.

Wholesale. The remaining 29% of sales are from wholesale operations through 1,400

clients (and approximately 1,800 doors). The top five clients represent 7.6% of net sales.

Prada also distributes through 33 mono-brand franchise stores.

E-commerce. In the financial year ended January 31, 2011, the e-commerce retail

channel generated approximately €1.9 mn.

Style & Desgin

Product develop

DistributionSourcing

and Production

Fashion Shows

Showroom Presentation

Quality Control

Logistics



Exhibit 124: Prada manufacturing network

Production facilities

Exhibit 125: Prada store network

Geographical distribution of DOS



Management

Prada has an experienced senior management team. As well as a number of experienced

executives in each of the regions and at each of the brands, the main executives are:

President: Miuccia Prada. Ms Prada is a co-founder of the group along with Mr

Bertelli, Chief Executive Officer. Ms Prada leads the design process and is also

married to Mr Bertelli.

Chief Executive Officer: Patrizio Bertelli. Mr Bertelli is a co-founder of the group along

with Ms Prada, President.

Deputy Chairman: Carlo Mazzi. Mr Mazzi was appointed Executive Deputy Chairman

on November 9, 2004.

Group CFO: Donatello Galli. Mr Galli was appointed to the board in 2005.

Group COO – Commercial Director: Sebastian Suhl. Appointed to Group COO in 2009.

Head of Business Control: Armando Tolomelli. Joined the Group in 2005.

Head of Investor Relations: Alessandra Cozzani. Joined the Group in 2000.

The non-executives include Marco Salomoni, Gian Franco Oliviero Mattei and Giancarlo

Forestieri.

Location

Arezzo, Italy

Civitanova Marche, Italy

Dolo, Venice, Italy

Fuececchio, Florence, Italy

Levane, Arezzo, Italy

Montegranaro, Fermo, Italy

Montone, Perugia, Italy

Northampton, United Kingdom

Piancastagnaio, Siena, Italy

Scandicci, Florence, Italy

Torgiano, Perugia, Italy Knitwear Prada 47

Leather goods - bags Prada, Miu Miu 35

Leather goods - bags Prada, Miu Miu 47

Men's shoes Church's 330

RTW (Shirts, Trousers) Prada 87

Men's shoes Prada 106

Women's shoes Prada 309

Leather RTW Prada 21

Women's shoes Miu Miu 54

Men's shoes Prada 40

Products Brands Headcount

Leather goods - belts Prada, Miu Miu 34

Prada Miu Miu Church's Car Shoe TotalTotal Italy 19 8 7 3 37Spain 3 1 1 5France + Monaco 17 8 5 30Belgium 1 1Germany + Austria 7 3 10UK + Ireland 12 5 14 31Greece 1 1Czech Republic 1 1Netherlands 1 1Turkey 2 1 3Portugal 1 1Switzerland 1 3 4Total Europe 46 18 24 0 88Total USA + Canada 26 7 1 34Total Japan (inc. Guam and Saipan) 43 13 56Korea 20 4 3 1 28HK + Macau 11 7 1 1 20Singapore 5 4 9Taiwan 7 2 9Malayasia + Thailand 4 1 5China 14 4 18Hawaii 4 1 5Austalia + NZ 8 2 10Total Asia - Pacific 73 25 4 2 104Total Direct Stores 207 71 36 5 319



Appendix 2: Detailed financials

Exhibit 126: Prada – Profit & Loss Account Year-end January, € mn


Profit and Loss Statement (EUR million) 2009 2010 2011 2012E 2013E 2014E 2015E 2016ETotal revenue 1643.6 1561.2 2046.7 2489.9 2963.2 3484.4 4033.3 4580.1

growth -5.0% 31.1% 21.7% 19.0% 17.6% 15.8% 13.6%Cost of goods sold -690.5 -586.6 -658.8 -746.7 -848.6 -959.5 -1090.5 -1215.4growth -15.1% 12.3% 13.3% 13.6% 13.1% 13.6% 11.5%% of sales 42.0% 37.6% 32.2% 30.0% 28.6% 27.5% 27.0% 26.5%Gross Profit 953.1 974.7 1387.9 1743.2 2114.6 2524.9 2942.8 3364.7growth 2.3% 42.4% 25.6% 21.3% 19.4% 16.5% 14.3%% of sales 58.0% 62.4% 67.8% 70.0% 71.4% 72.5% 73.0% 73.5%Product and development expenses -88.2 -96.8 -97.2 -118.2 -124.4 -127.1 -137.0 -144.2growth 9.7% 0.4% 21.7% 5.2% 2.2% 7.8% 5.2%% of sales 5.4% 6.2% 4.7% 4.7% 4.2% 3.6% 3.4% 3.1%Advertising and Promotion expenses -99.5 -75.8 -85.1 -124.5 -140.7 -156.8 -181.5 -206.1growth -23.8% 12.3% 46.3% 13.1% 11.4% 15.8% 13.6%% of sales 6.1% 4.9% 4.2% 5.0% 4.8% 4.5% 4.5% 4.5%Selling expenses -428.1 -484.6 -642.5 -760.5 -955.5 -1187.4 -1448.3 -1728.6growth 13.2% 32.6% 18.4% 25.6% 24.3% 22.0% 19.4%% of sales 26.0% 31.0% 31.4% 30.5% 32.2% 34.1% 35.9% 37.7%

of which rent -189 -219 -295 -369 -447 -528 -613 -701growth 16.0% 34.7% 25.2% 21.0% 18.1% 16.0% 14.4%% of sales 11.5% 14.0% 14.4% 14.8% 15.1% 15.2% 15.2% 15.3%of which other selling expenses -239 -266 -347 -391 -508 -659 -836 -1028growth 11.0% 30.8% 12.5% 30.0% 29.7% 26.8% 23.0%% of sales 14.6% 17.0% 17.0% 15.7% 17.2% 18.9% 20.7% 22.4%

General and administration expenses -146.3 -130.4 -144.7 -163.6 -170.7 -173.7 -201.1 -228.3growth -10.9% 11.0% 13.1% 4.3% 1.8% 15.8% 13.6%% of sales 8.9% 8.4% 7.1% 6.6% 5.8% 5.0% 5.0% 5.0%SG&A -762.1 -787.6 -969.5 -1166.8 -1391.3 -1645.0 -1967.9 -2307.2growth 3.3% 23.1% 20.4% 19.2% 18.2% 19.6% 17.2%% of sales 46.4% 50.4% 47.4% 46.9% 47.0% 47.2% 48.8% 50.4%EBIT 191.0 187.0 418.4 576.4 723.3 879.9 974.9 1057.5growth -2.1% 123.7% 37.8% 25.5% 21.7% 10.8% 8.5%margin 11.6% 12.0% 20.4% 23.1% 24.4% 25.3% 24.2% 23.1%EBITDA 282.6 290.2 535.9 714.6 893.3 1090.8 1284.2 1482.7growth -11.4% 2.7% 84.7% 33.3% 25.0% 22.1% 17.7% 15.5%margin 17.2% 18.6% 26.2% 28.7% 30.1% 31.3% 31.8% 32.4%EBITDA Margin YoY (BP) 139 760 251 145 116 54 53 Depreciation and Amortisation -91.7 -103.2 -117.5 -138.2 -170.0 -210.9 -309.4 -425.2growth 12.5% 13.9% 17.6% 23.0% 24.1% 46.7% 37.5%As % of sales 5.6% 6.6% 5.7% 5.6% 5.7% 6.1% 7.7% 9.3%CAPEX / D&A 1.6x 1.3x 1.6x 1.8x 1.7x 1.4x 0.9x 0.6xNet interest income, with related parties 1.7 0.3 0.5 0.8 4.1 10.9 17.7 31.3Net interest expenses, with third parties -27.2 -17.0 -17.8 -13.0 -10.8 -7.7 -3.5 -2.1Realized exchange gains -0.2 -3.3 -5.4Unrealized exchange gains -1.9 -4.7 0.7Other financial income/(expenses) -9.6 -7.3 -8.2Net financial income / (expense) -37.1 -31.9 -30.2 -12.2 -6.7 3.3 14.2 29.2Dividend recdProfit from ordinary operations 153.8 155.2 388.2 564.2 716.6 883.2 989.1 1086.7growth 0.9% 150.2% 45.3% 27.0% 23.2% 12.0% 9.9%Net extraord income/(charges)Pre tax profit 153.8 155.2 388.2 564.2 716.6 883.2 989.1 1086.7growth 0.9% 150.2% 45.3% 27.0% 23.2% 12.0% 9.9%Income taxes -52.6 -52.5 -134.7 -174.9 -222.1 -273.8 -306.6 -336.9growth -0.2% 156.5% 29.9% 27.0% 23.2% 12.0% 9.9%Tax rate 34.2% 33.8% 34.7% 31.0% 31.0% 31.0% 31.0% 31.0%Net income pre MI 101.2 102.6 253.6 389.3 494.4 609.4 682.5 749.8growth 1.4% 147.0% 53.5% 27.0% 23.2% 12.0% 9.9%Minority Interests -1.8 -0.2 -2.7 -2.7 -2.7 -2.7 -2.7 -2.7Discontinued operations -0.6 -2.3 0.0Net income 98.8 100.2 250.8 386.5 491.7 606.6 679.7 747.1growth 1.4% 150% 54% 27% 23% 12% 10%margin 6.0% 6.4% 12.3% 15.5% 16.6% 17.4% 16.9% 16.3%



Exhibit 127: Prada – Cash flow statement Year-end January, € mn


Cashflow Statement 2009 2010 2011 2012E 2013E 2014E 2015E 2016E

Profit/(loss) for the period - continued ops 100.6 100.3 253.6 389.3 494.4 609.4 682.5 749.8Non cash adjustments:Tax charge 52.6 52.5 134.7 174.9 222.1 273.8 306.6 336.9Net financials 27.8 30.0 23.5 12.2 6.7 -3.3 -14.2 -29.2Amortisation, depreciation, revaluations 80.1 94.3 111.5 138.2 170.0 210.9 309.4 425.2Impairments 11.8 9.4 6.1Other non-monetary changes -0.5 4.8 26.8 0.0 0.0 0.0 0.0 0.0Cash flow 272.4 291.3 556.1 714.6 893.3 1090.8 1284.2 1482.7GrowthChange in current assets/liabilities:Trade account receivables 8.6 24.4 -46.1 -24.8 -15.7 -7.0 5.4 20.7Inventories 41.8 15.0 -46.4 -46.6 -55.1 -61.8 -74.0 -74.3Trade account payables -8.9 -33.5 36.9 31.2 36.2 39.4 46.5 44.4Others -14.5 43.3 -19.9Change in operating working capital 26.9 49.2 -75.4 -40.2 -34.6 -29.4 -22.2 -9.2

Adjustments, exchange rates, etcInterest recd -35.4 -21.2 -22.8 -12.2 -6.7 3.3 14.2 29.2Income taxes paid -98.1 -39.4 -90.2 -174.9 -222.1 -273.8 -306.6 -336.9Cash flow from operations 165.9 279.9 367.7 487.2 629.8 790.9 969.7 1165.8

Net investments in fixed assets -144.3 -132.8 -187.6 -251.5 -287.4 -294.4 -290.4 -272.5Growth -8% 41% 34% 14% 2% -1% -6%As % of sales 8.8% 8.5% 9.2% 10.1% 9.7% 8.5% 7.2% 6.0%As % of Net Assets 11.3% 10.1% 13.3% 16.6% 17.6% 17.1% 17.1% 17.6%Purchase of intangiblesAcquisitions of subsidiaries, net of cash acquired -7.8 -9.3 -4.0 0.0 0.0 0.0 0.0 0.0Change in other non current assetsCashflow from investing activities -152.1 -142.1 -191.6 -251.5 -287.4 -294.4 -290.4 -272.5

-10.1% -9.7% -8.5% -7.2% -6.0%Dividends paid -1.3 -48.1 -59.4 -60.0 -135.2 -166.8 -186.9 -205.4Change in shareholders equityChange in debt -15.2 -77.0 -109.9 -127.2 -19.1 -190.5 -90.0 0.0Exchange differences 7.3 -3.3 3.5Cashflow from financing activities -9.1 -128.5 -165.8 -187.2 -154.3 -357.4 -276.9 -205.4

Net cashflow 4.7 9.3 10.3 48.6 188.1 139.1 402.3 687.8

9.3 10.3 48.6 188.1 139.1 402.3 687.8Free Cash Flow 21.6 147.1 180.1 235.8 342.4 496.5 679.3 893.3



Exhibit 128: Prada – Balance sheet Year-end January, € mn


Balance Sheet 2009 2010 2011 2012E 2013E 2014E 2015E 2016EInventories 251.2 231.5 280.4 327.0 382.1 443.9 518.0 592.3 Days 133 144 155 160 164 169 173 178 Trade account receivables 250.5 224.2 274.2 299.0 314.6 321.6 316.2 295.5 Days 55 52 48 43 38 33 28 23 Receivables from parent company 22.3 56.4 36.3 36.3 36.3 36.3 36.3 36.3Other current assets 133.9 74.9 77.6 77.6 77.6 77.6 77.6 77.6Assets held for sales 1.4 1.4 4.9 4.9 4.9 4.9 4.9 4.9Total Current Assets 659.3 588.4 673.5 744.9 815.6 884.4 953.1 1006.7

Gross Intangible assets (est) 1109.5 1135.5 1139.6 1139.6 1139.6 1139.6 1139.6 1139.6Accumulated Amortisation (est) -208.4 -242.2 -270.5 -270.5 -270.5 -270.5 -270.5 -270.5Net Intangible assets 901.1 893.3 869.1 869.1 869.1 869.1 869.1 869.1

Gross Tangible assets (est) 803.4 880.0 1076.9 1328.4 1615.8 1910.3 2200.7 2473.2Accumulated Depreciation (est) -424.2 -462.0 -540.2 -678.4 -848.4 -1059.3 -1368.7 -1793.9Net Tangible assets 379.2 418.0 536.7 650.0 767.4 850.9 832.0 679.3

Deferred tax asset 106.2 111.4 141.4 141.4 141.4 141.4 141.4 141.4Other non-current assets 33.4 28.4 47.0 1.8 1.8 1.8 1.8 1.8Equity investments 9.9 9.5 1.8 1.8 1.8 1.8 1.8 1.8Total Fixed Assets 1429.8 1460.5 1596.0 1664.0 1781.4 1865.0 1846.0 1693.3

Cash 86.9 98.6 96.6 145.2 333.3 472.4 874.8 1562.6Bank OD -27.0 -29.4 -17.1 -17.1 -17.1 -17.1 -17.1 -17.1ST Debt -339.6 -429.9 -177.2 -50.0 -50.0 -50.0 -50.0 -50.0LT Debt -264.0 -111.4 -303.4 -303.4 -284.3 -93.8 -3.8 -3.8Net Cash/(Debt) -543.7 -472.2 -401.1 -225.3 -18.1 311.6 803.9 1491.7Net Cash/(Debt) : EBITDA -1.9x -1.6x -0.7x -0.3x 0.0x 0.3x 0.6x 1.0x

Total Assets 1545.5 1576.8 1868.4 2183.6 2579.0 3060.9 3602.9 4191.7

Trade account payables 230.5 196.4 233.9 265.1 301.2 340.6 387.1 431.5 Days 120 121 128 128 128 128 128 128 Payables to parent company and related parties 3.2 5.6 1.1 1.1 1.1 1.1 1.1 1.1Other shareholders' loans 0.5 0.5 0.6 0.6 0.6 0.6 0.6 0.6Taxes payables 33.9 62.2 107.6 107.6 107.6 107.6 107.6 107.6Derivative financial liablities 21.3 9.3 5.3 5.3 5.3 5.3 5.3 5.3Obligation under financial leases 3.4 5.5 5.0 5.0 5.0 5.0 5.0 5.0Other current liabilities 93.4 90.7 111.5 111.5 111.5 111.5 111.5 111.5Current Liabilities 386.2 370.3 464.9 496.1 532.3 571.7 618.2 662.5

Obligation under financial leases 7.7 7.7 2.5 2.5 2.5 2.5 2.5 2.5Post employment benefits 36.1 36.8 34.9 34.9 34.9 34.9 34.9 34.9Provisions 14.1 13.1 52.7 52.7 52.7 52.7 52.7 52.7Deferred tax liabilities 64.5 59.4 52.7 52.7 52.7 52.7 52.7 52.7Other long term liability 22.4 32.6 50.2 50.2 50.2 50.2 50.2 50.2Derivative financial instruments 2.1 0.2 0.3 0.3 0.3 0.3 0.3 0.3Total Long Term Liabilities 147.0 149.8 193.4 193.4 193.4 193.4 193.4 193.4

Share capital 250.0 250.0 250.0 250.0 250.0 250.0 250.0 250.0Reserves 654.3 598.9 504.6 459.2 459.2 459.2 459.2 459.2Retained earnings 98.8 199.0 449.8 776.3 1132.8 1572.6 2065.4 2607.1Minority Interests 9.2 8.8 5.8 8.5 11.3 14.0 16.7 19.4Total shareholders equity 1012.3 1056.7 1210.1 1494.1 1853.3 2295.9 2791.4 3335.8

Total Liabilities and Equity 1545.5 1576.8 1868.4 2183.6 2579.0 3060.9 3602.9 4191.7



Exhibit 129: Prada in FY2009…

% of revenues

Exhibit 130: … Prada by FY2014E

% of revenues

Note clothing refers to ready-to-wear




Prada, 79%

Miu Miu, 15%

Church's, 3% Car Shoe, 2% Others, 1%

Italy, 24%

Europe, 27%North

America, 18%

Asia-Pacific,

18%

Japan, 12%

Others, 1%

Clothing, 29%

Leather

goods, 40%

Footwear, 30%

Others, 1%

DOS, 54%

Wholesale,

46%

Prada, 77%

Miu Miu, 21%

Church's, 2% Car Shoe, 1% Others, 0%

Italy, 17%

Europe, 19%

North

America,

13%

Asia-Pacific,

44%

Japan,

8%

Others, 1%

RTW, 23%

Leather

goods, 55%

Footwear, 22%

Others, 1%

DOS, 84%

Wholesale,

16%



Exhibit 131: Prada Brand Year-end January, € mn

Note clothing refers to ready-to-wear.


Prada Brand 2009 2010 2011 2012E 2013E 2014ENet sales by geographic area

Italy 286.8 249.0 302.0 351.9 392.3 433.5growth -13% 21% 17% 12% 11%% of total 23% 21% 19% 18% 17% 16%

Europe 331.2 284.3 341.5 397.9 443.7 490.2growth -14% 20% 17% 12% 11%% of total 26% 24% 22% 21% 20% 19%

North America 254.5 203.3 260.3 303.3 338.1 370.3growth -20% 28% 17% 12% 10%% of total 20% 17% 16% 16% 15% 14%

Asia-pacific 234.2 326.9 517.0 692.8 907.6 1157.2growth 40% 58% 34% 31% 28%% of total 19% 27% 33% 36% 40% 44%

Japan 140.6 135.2 157.1 163.3 169.9 176.7growth -4% 16% 4% 4% 4%% of total 11% 11% 10% 9% 8% 7%

Other countries 18.3 10.8 8.9 9.3 11.2 13.4growth -41% -18% 5% 20% 20%% of total 1% 1% 1% 0% 0% 1%

Total 1265.6 1209.5 1586.8 1918.5 2262.8 2641.3growth -4% 31.2% 20.9% 17.9% 16.7%

Net sales by product lineClothing 410.0 347.7 419.5 486.2 567.3 655.1

growth -15% 21% 16% 17% 15%% of total 32% 29% 26% 25% 25% 25%

Leather goods 498.6 553.7 786.0 989.6 1182.0 1397.4growth 11% 42% 26% 19% 18%% of total 39% 46% 50% 52% 52% 53%

Footwear 346.8 297.1 366.4 424.6 493.4 567.3growth -14% 23% 16% 16% 15%% of total 27% 25% 23% 22% 22% 21%

Other 10.2 11.0 15.0 18.1 20.0 21.4growth 8% 36.2% 21% 10.6% 6.7%% of total 1% 1% 1% 1% 1% 1%

Total 1265.6 1209.5 1586.8 1918.5 2262.8 2641.3growth -4% 31.2% 20.9% 17.9% 16.7%

Net sales by distribution networkDOS - outlets included 698.8 779.2 1120.0 1444.8 1805.9 2221.3

growth 12% 44% 29% 25% 23%Store, Fx, % 10% 19% 17% 14% 12%LFL % 2% 25% 12% 11% 11%

Net sales 1265.6 1209.5 1586.8 1918.5 2262.8 2641.3growth -4% 31.2% 20.9% 17.9% 16.7%% of total 97% 98% 98% 98% 99% 99%

Royalties 36.7 28.6 27.9 29.3 30.8 32.3% of total 3% 2% 2% 2% 1% 1%

Total Revenues 1302.4 1238.1 1614.8 1947.8 2293.5 2673.6growth -5% 30.4% 20.6% 17.7% 16.6%% of total 79% 79% 79% 78% 77% 77%No. of stores 195 206 234 274 313 352

Owned 166 177 207 251 292 333Franchise 29 29 27 23 21 19sales per DOS 4.4 5.4 5.8 6.2 6.7growth 23% 6% 7% 8%

EBITDA 250.4 249.8 453.6 590.9 718.8 864.6growth 0% 81.6% 30.3% 21.6% 20.3%margin 19.2% 20.2% 28.1% 30.3% 31.3% 32.3%% of total 89% 86% 85% 83% 80% 79%



Exhibit 132: Miu Miu Brand Year-end January, € mn



Miu Miu Brand 2009 2010 2011 2012E 2013E 2014ENet sales by geographic area

Italy 55.7 51.8 61.3 74.8 89.8 106.0growth -7% 18% 22% 20% 18%% of total 23% 21% 17% 16% 15% 15%

Europe 60.8 55.8 70.1 85.6 102.7 121.2growth -8% 26% 22% 20% 18%% of total 25% 22% 20% 19% 18% 17%

North America 30.0 22.1 32.2 40.2 49.5 59.9growth -26% 46% 25% 23% 21%% of total 13% 9% 9% 9% 9% 8%

Asia-pacific 45.1 66.5 123.7 185.6 259.8 343.0growth 47% 86% 50% 40% 32%% of total 19% 26% 35% 40% 45% 48%

Japan 44.5 53.7 63.3 69.7 76.6 84.3growth 21% 18% 10% 10% 10%% of total 19% 21% 18% 15% 13% 12%

Other countries 3.4 2.5 2.3 2.8 3.3 4.0growth -27% -7% 20% 20% 20%% of total 1% 1% 1% 1% 1% 1%

Total 239.5 252.3 353.0 458.7 581.8 718.3growth 5% 39.9% 29.9% 26.8% 23.5%

Net sales by product lineClothing 54.0 46.5 63.3 80.3 100.3 121.9

growth -14% 36% 27% 25% 22%% of total 23% 18% 18% 18% 17% 17%



Other 0.6 1.0 1.8 2.6 2.6 2.7growth 64% 69.6% 45% 1.4% 4.4%% of total 0% 0% 0% 1% 0% 0%

Total 239.5 252.3 353.0 458.7 581.8 718.3growth 5% 39.9% 29.9% 26.8% 23.5%

Net sales by distribution networkDOS - outlets included 132.9 177.3 264.4 364.8 492.5 635.4

growth 33% 49% 38% 35% 29%Store, Fx, % 31% 38% 30% 25% 19%LFL % 3% 12% 8% 10% 10%

Net sales 239.5 252.3 353.0 458.7 581.8 718.3growth 5% 39.9% 29.9% 26.8% 23.5%% of total 99% 99% 100% 100% 100% 100%


Total Revenues 241.9 254.0 354.5 460.6 583.8 720.4growth 8% 5% 39.6% 29.9% 26.7% 23.4%% of total 15% 16% 17% 18% 20% 21%No. of stores 39 57 77 113 151 189

Owned 36 51 71 109 147 185Franchise 3 6 6 4 4 4sales per DOS 3.7 3.5 3.7 3.3 3.4 3.4growth -6% 7% -10% 0% 3%




Exhibit 133: Prada Group revenues and EBITDA for Prada and Miu Miu brands Year-end January, € mn


Sales by brand 2009 2010 2011 2012E 2013E 2014E

Prada Brand 2009 2010 2011 2012E 2013E 2014EStore, Fx, % 10% 19% 17% 14% 12%LFL % 2% 25% 12% 11% 11%

Net sales 1265.6 1209.5 1586.8 1918.5 2262.8 2641.3growth -4% 31.2% 20.9% 17.9% 16.7%% of total 97% 98% 98% 98% 99% 99%


Total Revenues 1302.4 1238.1 1614.8 1947.8 2293.5 2673.6growth -5% 30.4% 20.6% 17.7% 16.6%% of total 79% 79% 79% 78% 77% 77%No. of stores 195 206 234 274 313 352

Owned 166 177 207 251 292 333Franchise 29 29 27 23 21 19sales per DOS 4.4 5.4 5.8 6.2 6.7growth 23% 6% 7% 8%


Miu Miu Brand 2009 2010 2011 2012E 2013E 2014EStore, Fx, % 31% 38% 30% 25% 19%LFL % 3% 12% 8% 10% 10%

Net sales 239.5 252.3 353.0 458.7 581.8 718.3growth 5% 39.9% 29.9% 26.8% 23.5%% of total 99% 99% 100% 100% 100% 100%


Total Revenues 241.9 254.0 354.5 460.6 583.8 720.4growth 8% 5% 39.6% 29.9% 26.7% 23.4%% of total 15% 16% 17% 18% 20% 21%No. of stores 39 57 77 113 151 189

Owned 36 51 71 109 147 185Franchise 3 6 6 4 4 4sales per DOS 3.7 3.5 3.7 3.3 3.4 3.4growth -6% 7% -10% 0% 3%




Exhibit 134: Prada Group sales by geographical area Year-end January, € mn

The difference between total revenues and consolidated revenues is Royalty income.


Net sales by geographic area 2009 2010 2011 2012E 2013E 2014EItaly 385.2 330.0 393.3 455.9 512.8 571.7

growth -14% 19% 16% 12% 11%Fx growth 0% 0% 0% 0%Comp Fx 19% 16% 12% 11%% of total 24% 22% 19% 19% 18% 17%No. of stores 36 36 42 49 56 63

Owned 31 31 37 44 51 58Franchise 5 5 5 5 5 5

Europe 436.3 373.0 450.5 520.0 584.7 651.7growth -15% 21% 15% 12% 11%Fx growth 1% 1% 0% 0%Comp Fx 19% 15% 12% 11%% of total 27% 24% 22% 21% 20% 19%No. of stores 74 86 101 120 139 158

Owned 63 73 88 108 128 148Franchise 11 13 13 12 11 10

North America 290.0 227.8 294.9 345.9 390.2 432.8growth -21% 29% 17% 13% 11%Fx growth 8% 7% 0% 0%Comp Fx 21% 10% 13% 11%% of total 18% 15% 15% 14% 13% 13%No. of stores 20 21 34 49 64 79

Owned 20 21 34 49 64 79Franchise 0 0 0 0 0 0

Asia-pacific 282.7 396.1 645.7 883.8 1173.4 1506.7growth 40% 63% 37% 33% 28%Fx growth 14% 2% 0% 0%Comp Fx 49% 35% 33% 28%% of total 18% 26% 32% 36% 40% 44%No. of stores 84 102 117 145 173 201

Owned 72 87 104 134 164 194Franchise 12 15 13 11 9 7

Japan 186.8 189.4 220.9 233.6 247.1 261.5growth 1% 17% 6% 6% 6%Fx growth 14% 1% 0% 0%Comp Fx 3% 5% 6% 6%% of total 12% 12% 11% 10% 8% 8%No. of stores 52 53 56 58 60 62

Owned 52 53 56 58 60 62Franchise 0 0 0 0 0 0

Other countries 23.1 14.2 11.8 12.7 15.2 18.1growth -38% -17% 8% 19% 19%Fx growth -17%Comp Fx% of total 1% 1% 1% 1% 1% 1%No. of stores 4 2 2 11 20 29

Owned 0 0 0 12 20 28Franchise 4 2 2 -1 0 1

Total 1604.1 1530.6 2017.1 2451.9 2923.3 3442.5growth -5% 32% 22% 19% 18%Fx growth 2% 0% 0%Comp Fx 20% 19% 18%No. of stores 270 300 352 432 512 592

Owned 238 265 319 405 487 569Franchise 32 35 33 27 25 23



Exhibit 135: Prada Group sales by product line Year-end January, € mn

NB clothing refers to ready-to-wear. The difference between total revenues and consolidated revenues is Royalty income.


Net sales by product line 2009 2010 2011 2012E 2013E 2014EClothing 470.8 396.4 483.6 567.0 668.2 777.7

growth -16% 22% 17% 18% 16%% of total 29% 26% 24% 23% 23% 23%



Other 10.8 12.0 16.8 20.7 22.6 24.1growth -17% 11% 39% 23% 10% 7%% of total 1% 1% 1% 1% 1% 1%

Total 1604.1 1530.6 2017.1 2451.9 2923.3 3442.5growth -1% -5% 32% 22% 19% 18%



Appendix 3: Global Luxury Sector Performance

Exhibit 136: Global Luxury share price performance

Source: Datastream.

1M 3M 12M YTDPrada 4.4%Burberry 3.1% 15.4% 76.2% 32.9%Hermes 20.4% 52.2% 85.1% 53.6%LVMH 4.4% 5.5% 39.0% 3.9%PPR 5.7% 6.8% 26.0% 8.4%Richemont -6.3% -8.7% 25.2% -7.2%Swatch 1.7% 0.6% 32.5% 2.7%Tod's 3.3% 1.9% 69.0% 26.3%Luxottica 1.1% -0.9% 12.3% -3.1%Average 2.2% 3.0% 40.0% 9.2%Coach 4.0% 7.9% 77.1% 16.7%Polo Ralph Lauren 3.1% 3.3% 72.5% 21.8%Tiffany 2.4% 14.6% 91.7% 27.8%Average 3.1% 8.6% 80.5% 22.1%Belle International 5.3% 12.5% 42.4% 29.8%Trinity 15.8% 2.9% 71.1% 5.5%Hengdeli -3.3% -16.8% 6.6% -16.4%L'Occitane 3.6% 15.3% 25.6% -0.2%Average 2.1% -1.8% 25.9% -31.6%

Macy's 0.4% 20.7% 54.9% 14.1%Nordstrom 8.9% 5.5% 49.6% 18.4%Saks -3.6% -10.2% 30.5% 0.4%Average 1.9% 5.3% 45.0% 10.9%Golden Eagle Retail Group -0.6% -5.4% 6.5% 0.5%Maoye International -7.5% -5.3% 18.8% 6.0%Lifestyle International 17.0% 14.9% 61.2% 33.2%Parkson Retail Group -2.0% -8.1% -17.0% -8.5%New World Department stores -4.4% -15.8% -15.7% -189.2%Intime Department Store 2.0% 7.8% 57.3% 15.0%Average 0.8% -2.0% 18.5% -23.8%

Performance

Europe

Luxu

ry a

nd P

rem

ium

Bra

nds

Asia

US

Dep

artm

ent s

tore

s

US

Asia



Reg AC

We, William Hutchings, Joshua Lu, Szilvia Bor and Lucy Baldwin, hereby certify that all of the views expressed in this report accurately reflect our

personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will

be, directly or indirectly, related to the specific recommendations or views expressed in this report.

Investment Profile

The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and

market. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites

of several methodologies to determine the stocks percentile ranking within the region's coverage universe.

The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:

Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate

of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend

yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.

Quantum

Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for

in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

GS SUSTAIN

GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list

includes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage and

superior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporate

performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the

environmental, social and governance issues facing their industry).

Disclosure Appendix

Coverage group(s) of stocks by primary analyst(s)

William Hutchings: Europe-General Retail. Joshua Lu: Asia Pacific Consumer and Retail, Hong Kong/China Consumer. Lucy Baldwin: Europe-

General Retail.

Asia Pacific Consumer and Retail: Ajisen China Holdings, Amorepacific, CJ CheilJedang, CJ O Shopping, DongA Pharmaceutical, Far Eastern

Department Stores, Gourmet Master, Grand Korea Leisure Co., GS Home Shopping, Hana Tour Service, Hanmi Pharm, Hyundai Department Store,

Kangwon Land, KT&G, LG Household & Healthcare, Lotte Shopping, Orion, President Chain Store, Ruentex Industries, Shinsegae, Stella

International Holdings, Uni-President Enterprise, Woongjin Coway, Yue Yuen Industrial, Yuhan Corporation.

Europe-General Retail: adidas, Benetton Group, Bulgari S.p.A., Burberry, Debenhams, Dixons Retail plc, Douglas Holding AG, Essilor, Fielmann,

Geox, Halfords Group, Hennes & Mauritz, Hermes International, Home Retail Group, Hugo Boss AG (Pref), Inditex, KappAhl Holding AB, KESA,

Kingfisher, Luxottica (Italy), LVMH Moet-Hennessy Louis Vuitton, Marks & Spencer, Mothercare PLC, N Brown Group, Next, Pandora, Pinault

Printemps-Redoute, Prada SpA, Puma, Richemont, Signet Jewelers, Stockmann, SuperGroup, The Swatch Group (Bearer share), Ted Baker, Tod's.

Hong Kong/China Consumer: 361 Degrees International, Anta Sports Products, Beijing Wangfujing Department Store (Group) Co., Belle

International Holdings, Bosideng International Holdings, China Dongxiang Group, Daphne International Holdings, Dashang Group Co, Esprit

Holdings, GD Midea Holding, Golden Eagle Retail Group, Gome Electrical Appliances Holding, Gree Electric Appliances, Guangzhou Friendship

Group Co, Haier Electronics Group, Hefei Rongshida Sanyo Electric, Hisense Electric Co., Hisense Kelon Electrical Holdings (A), Hisense Kelon

Electrical Holdings (H), Hunan Friendship & Apo. Co, Intime Department Store (Group) Co., Li & Fung, Li Ning Company, Lifestyle International

Holdings, Maoye International Holdings, New World Department Store China, Parkson Retail Group, Peak Sport Products, Ports Design, Qingdao

Haier Company, Samsonite International SA, Shanghai Bailian Group Co, Shanghai Metersbonwe Fashion & Accessories Co., Skyworth Digital,

Suning Appliance Co., TCL Multimedia, Wuhan Department Store Group Co., Wuxi Little Swan Company (A), Wuxi Little Swan Company (B), Xtep

International Holdings.

Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies

covered by the Global Investment Research Division of Goldman Sachs and referred to in this research.

Goldman Sachs has received compensation for investment banking services in the past 12 months: Prada SpA (HK$45.65)

Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Prada SpA (HK$45.65)



Goldman Sachs has received compensation for non-investment banking services during the past 12 months: Prada SpA (HK$45.65)

Goldman Sachs had an investment banking services client relationship during the past 12 months with: Prada SpA (HK$45.65)

Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Prada SpA (HK$45.65)

Goldman Sachs had a non-securities services client relationship during the past 12 months with: Prada SpA (HK$45.65)

Goldman Sachs has managed or co-managed a public or Rule 144A offering in the past 12 months: Prada SpA (HK$45.65)

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global coverage universe

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell

Global 32% 54% 14% 52% 41% 37%

As of July 1, 2011, Goldman Sachs Global Investment Research had investment ratings on 3,167 equity securities. Goldman Sachs assigns stocks as

Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for

the purposes of the above disclosure required by NASD/NYSE rules. See 'Ratings, Coverage groups and views and related definitions' below.

Regulatory disclosures

Disclosures required by United States laws and regulations

See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager

or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-

managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs usually makes a

market in fixed income securities of issuers discussed in this report and usually deals as a principal in these securities.

The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts,

professionals reporting to analysts and members of their households from owning securities of any company in the analyst's area of coverage.

Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues.

Analyst as officer or director: Goldman Sachs policy prohibits its analysts, persons reporting to analysts or members of their households from

serving as an officer, director, advisory board member or employee of any company in the analyst's area of coverage. Non-U.S. Analysts: Non-U.S.

analysts may not be associated persons of Goldman Sachs & Co. and therefore may not be subject to NASD Rule 2711/NYSE Rules 472 restrictions

on communications with subject company, public appearances and trading securities held by the analysts.

Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets

in prior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachs

website at http://www.gs.com/research/hedge.html.

Additional disclosures required under the laws and regulations of jurisdictions other than the United

States

The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws

and regulations. Australia: This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian

Corporations Act. Brazil: Disclosure information in relation to CVM Instruction 483 is available at http://www.gs.com/worldwide/brazil/gir/index.html.

Where applicable, the Brazil-registered analyst primarily responsible for the content of this research report, as defined in Article 16 of CVM

Instruction 483, is the first author named at the beginning of this report, unless indicated otherwise at the end of the text. Canada: Goldman Sachs

& Co. has approved of, and agreed to take responsibility for, this research in Canada if and to the extent it relates to equity securities of Canadian

issuers. Analysts may conduct site visits but are prohibited from accepting payment or reimbursement by the company of travel expenses for such

visits. Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on request from

Goldman Sachs (Asia) L.L.C. India: Further information on the subject company or companies referred to in this research may be obtained from

Goldman Sachs (India) Securities Private Limited; Japan: See below. Korea: Further information on the subject company or companies referred to

in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch. Russia: Research reports distributed in the Russian Federation

are not advertising as defined in the Russian legislation, but are information and analysis not having product promotion as their main purpose and

do not provide appraisal within the meaning of the Russian legislation on appraisal activity. Singapore: Further information on the covered

companies referred to in this research may be obtained from Goldman Sachs (Singapore) Pte. (Company Number: 198602165W). Taiwan: This

material is for reference only and must not be reprinted without permission. Investors should carefully consider their own investment risk.

Investment results are the responsibility of the individual investor. United Kingdom: Persons who would be categorized as retail clients in the

United Kingdom, as such term is defined in the rules of the Financial Services Authority, should read this research in conjunction with prior

Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them by

Goldman Sachs International. A copy of these risks warnings, and a glossary of certain financial terms used in this report, are available from

Goldman Sachs International on request.

European Union: Disclosure information in relation to Article 4 (1) (d) and Article 6 (2) of the European Commission Directive 2003/126/EC is

available at http://www.gs.com/client_services/global_investment_research/europeanpolicy.html which states the European Policy for Managing

Conflicts of Interest in Connection with Investment Research.

Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer under the Financial Instrument and Exchange Law, registered with the

Kanto Financial Bureau (Registration No. 69), and is a member of Japan Securities Dealers Association (JSDA) and Financial Futures Association of

Japan (FFAJ). Sales and purchase of equities are subject to commission pre-determined with clients plus consumption tax. See company-specific

disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese

Securities Finance Company.

Ratings, coverage groups and views and related definitions

Buy (B), Neutral (N), Sell (S) -Analysts recommend stocks as Buys or Sells for inclusion on various regional Investment Lists. Being assigned a Buy

or Sell on an Investment List is determined by a stock's return potential relative to its coverage group as described below. Any stock not assigned

as a Buy or a Sell on an Investment List is deemed Neutral. Each regional Investment Review Committee manages various regional Investment



Lists to a global guideline of 25%-35% of stocks as Buy and 10%-15% of stocks as Sell; however, the distribution of Buys and Sells in any particular

coverage group may vary as determined by the regional Investment Review Committee. Regional Conviction Buy and Sell lists represent

investment recommendations focused on either the size of the potential return or the likelihood of the realization of the return.

Return potential represents the price differential between the current share price and the price target expected during the time horizon associated

with the price target. Price targets are required for all covered stocks. The return potential, price target and associated time horizon are stated in

each report adding or reiterating an Investment List membership.

Coverage groups and views: A list of all stocks in each coverage group is available by primary analyst, stock and coverage group at

http://www.gs.com/research/hedge.html. The analyst assigns one of the following coverage views which represents the analyst's investment

outlook on the coverage group relative to the group's historical fundamentals and/or valuation. Attractive (A). The investment outlook over the

following 12 months is favorable relative to the coverage group's historical fundamentals and/or valuation. Neutral (N). The investment outlook

over the following 12 months is neutral relative to the coverage group's historical fundamentals and/or valuation. Cautious (C). The investment

outlook over the following 12 months is unfavorable relative to the coverage group's historical fundamentals and/or valuation.

Not Rated (NR). The investment rating and target price have been removed pursuant to Goldman Sachs policy when Goldman Sachs is acting in

an advisory capacity in a merger or strategic transaction involving this company and in certain other circumstances. Rating Suspended (RS). Goldman Sachs Research has suspended the investment rating and price target for this stock, because there is not a sufficient fundamental basis

for determining, or there are legal, regulatory or policy constraints around publishing, an investment rating or target. The previous investment

rating and price target, if any, are no longer in effect for this stock and should not be relied upon. Coverage Suspended (CS). Goldman Sachs has

suspended coverage of this company. Not Covered (NC). Goldman Sachs does not cover this company. Not Available or Not Applicable (NA). The information is not available for display or is not applicable. Not Meaningful (NM). The information is not meaningful and is therefore excluded.

Global product; distributing entities

The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs, and

pursuant to certain contractual arrangements, on a global basis. Analysts based in Goldman Sachs offices around the world produce equity

research on industries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy. This research is

disseminated in Australia by Goldman Sachs & Partners Australia Pty Ltd (ABN 21 006 797 897) on behalf of Goldman Sachs; in Brazil by Goldman

Sachs do Brasil Banco Múltiplo S.A.; in Canada by Goldman Sachs & Co. regarding Canadian equities and by Goldman Sachs & Co. (all other

research); in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in Japan by Goldman Sachs

Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs & Partners New

Zealand Limited on behalf of Goldman Sachs; in Russia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company

Number: 198602165W); and in the United States of America by Goldman Sachs & Co. Goldman Sachs International has approved this research in

connection with its distribution in the United Kingdom and European Union.

European Union: Goldman Sachs International, authorized and regulated by the Financial Services Authority, has approved this research in

connection with its distribution in the European Union and United Kingdom; Goldman Sachs & Co. oHG, regulated by the Bundesanstalt für

Finanzdienstleistungsaufsicht, may also distribute research in Germany.

General disclosures

This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we

consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. We seek to update our research as

appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large

majority of reports are published at irregular intervals as appropriate in the analyst's judgment.

Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have

investment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research

Division. Goldman Sachs & Co., the United States broker dealer, is a member of SIPC (http://www.sipc.org).

Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and our

proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, our

proprietary trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views

expressed in this research.

We and our affiliates, officers, directors, and employees, excluding equity and credit analysts, will from time to time have long or short positions in,

act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research.

This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be

illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of

individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and,

if appropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from

them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may

occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.

Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all

investors. Investors should review current options disclosure documents which are available from Goldman Sachs sales representatives or at

http://www.theocc.com/about/publications/character-risks.jsp. Transactions cost may be significant in option strategies calling for multiple purchase

and sales of options such as spreads. Supporting documentation will be supplied upon request.

All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Not

all research content is redistributed to our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution of

our research by third party aggregators. For all research available on a particular stock, please contact your sales representative or go to

http://360.gs.com.

Disclosure information is also available at http://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY

10282.

Copyright 2011 Goldman Sachs.

No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Goldman Sachs Group, Inc.

Prada SpA (1913.HK)img.jrjimg.cn › 2011 › 08 › 20110804135457033.pdf · EPS growth 144.8 54.1...

Documents

Transcript of Prada SpA (1913.HK)img.jrjimg.cn › 2011 › 08 › 20110804135457033.pdf · EPS growth 144.8 54.1...