Corporate Credit Rating for PRADA S.P.A.: A3 (Affirm)

modefinance published on its CRA website the Corporate Credit Rating Affirm of PRADA S.P.A. and the rating assigned to the entity is A3. 

The company has a good capability of meeting its financial obligations. The high capitalization ensures low dependence on possible adverse macroeconomic conditions.

The reasons that have driven this decision are:

• Prada Group slightly decreased its overall profitability performance in the last considered period, despite the increase registered in turnover. Operating sales increased by 3%, but operating margins and profit for the period decreased. This is mainly due to the relevant investments that the group made in marketing activities and strategic operations, renewal of stores, new openings and relevant online campaign. Regarding solvency and liquidity, the group remains stable, it is necessary to underline the extremely high profile of capital structure, with a low level in leverage (0.71) and financial leverage (0.41). The cash flow analysis revealed Prada has enough liquid assets to meet its short-term commitments;
• As in the last considered periods, comparing Prada S.p.A. with its peer group, it emerges that the Group is well positioned in terms of turnover and solvency, both ranking in the top quartile. However, Prada presents an improvable profitability, ranking just above the first quartile of the peer group distribution;
• Prada is a long-established company and has a leadership position in its pertaining peer group. It is going through a period of downturn in profitability, despite the increase in total sales. But, the positive effects of the new investments will impact 2018 full-year report and 2019 results. All main controlling companies and subsidiaries of Prada S.p.A. present a good financial condition;
• In the last four-years period the industry presented an overall good solvency and sufficient liquidity. The Company is mostly subject to the macroeconomic situation of European and Eastern market, where most of the revenues come from. The general macroeconomic improvements registered worldwide, together with positive forecasts for 2018, are encouraging and could affect positively Prada, but the situation still remains uncertain;
• The Political tensions are intensifying, especially in Europe and United States. Prada doesn’t generate much revenue in Northern America, but the US protectionist policies could have a repercussion over the world economic outlook, above all in China already on the path of the import laws reinforcement. Also, Italian turmoil is not helping, with a critical situation with the European commission and countries in addition to domestic policy. All these factors could impact negatively Prada S.p.A. and its subsidiaries.

The present Corporate Credit rating is issued by modefinance under EU Regulation 1060/2009 and following amendments.

The present rating is unsolicited: the rated entity and/or related third parties have not participated in the rating process and modefinance has no access to accounts or other relevant internal documents of the rated entity and/or related third parties. Solicited and unsolicited ratings issued by modefinance are of comparable quality, as the solicitation status has no effect on methodologies used. More comprehensive information on modefinance Corporate Credit Ratings are available here.

The present Corporate Credit Rating is issued on MORE Methodology 2.0 and Rating Methodology 1.0. A comprehensive description of both methodologies, as well as information on modefinance Rating Scale and Mappings, is available at http://cra.modefinance.com/en/methodologies.

For information on historical default rates of modefinance Corporate Credit Ratings please refer to ESMA Central Repository and ESMA European Rating Platform.

The quality of the information available on the rated entity and used to determine the present rating was judged by modefinance as satisfactory. Please note that modefinance however is not in a position to guarantee the accuracy of those information. As such, modefinance can accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect.The present credit rating was notified to the rated entity in order to identify potential factual errors, as prescribed by the CRA Regulation.

The Rated Entity or Related Third Party has not purchased ancillary services from modefinance. The rating action issued by modefinance was performed independently. The analysts, members of the rating team involved in the process, modefinance Srl and its members and shareholders do not have any conflicts of interest in relation to the Rated Entity and/or Related Third Parties. If in the future a potential conflict of interest is identified in relation to the persons reported above, modefinance Ratings will provide the appropriate information and if necessary the rating will be withdrawn.

The present Credit Rating is an opinion of the general creditworthiness that modefinance issues on the rated entity, and should be relied upon to a limited degree. The issued rating is subject to an ongoing monitoring until withdrawal.

Eva Vocci – Head Analyst
eva.vocci@modefinance.com
+39 040 3756740

Pinar Dilek – Responsible for Rating Approval
pinar.dilek@modefinance.com
+39 040 3756740