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.

Reason for review: publication of 2018 Annual Accounts.

The reasons that have driven this decision are:

• Prada Group 2018 accounts have positively impacted on the balance sheet structure, with a consolidation of the financial position and an increase in net sales after a period of downturn. The company is still undergoing a period of transition and the potential acceleration of profits still has low visibility. Operating margins are lower than expectations, but it seems that management policies will show the expected results in the next years. As for cash flow, there are no problems relating to the generation of operating cash flows, and in two years the company has distributed over 500 million EUR in dividends and invested as many, demonstrating great financial capacity.
• As in the last considered periods, comparing Prada S.p.A. with its peer group the company is among the largest in the sector, although profitability can be improved. Prada is a long-established company and has a leadership position in its pertaining peer group.
• In the last four-year period, industry players are good in all considered ratio. Prada outperformed the peer group regarding solvency, liquidity slightly worsened, but it’s aligned with the industry and profitability remains the weakest aspect and could be improved. Compared to the previous year, the comparison between Prada and its peer group does not underline negative issues.
• The three main macroeconomic areas where Prada operates (Italy, Europe, China) showed a less performing 2018 from the point of view of global economic growth compared to 2017 due to several reasons (economic duties, political reasons, terrorism, monetary reasons, etc.) that could lead to further slowdowns even in the coming years. The situation remains uncertain. The Political tensions in countries are intensifying, as trade relationship tension between countries (China and USA). Unfavorable economic conditions, social or geopolitical situations leading to instability could result in lower travel volumes which might affect negatively the company, since an important part of sales is generated from tourism.

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 on this link.

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 here.

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 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.

Chiara Di Piazza - Head Analyst
chiara.dipiazza@modefinance.com
+39 040 3756742

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