Fashion companies in Italy (2010-2015) Report compiled by Mediobanca Research Area

Presentation available for download free of charge from www.mbres.it

Milan, International Press Association, 23 February 2016

Contents 1.

Global scenario

2.

Italian fashion seen by the Mediobanca Research Area

3.

The Italian fashion “Top15"

4.

The 143 Italian fashion companies

5.

9M 2015

6.

Between luxury and Formula 1

7.

The companies behind the brands

8.

What are our cousins up to?

2

Global scenario Section 1

3

Fashion: big business

Global fashion industry turnover (personal luxury goods)

Of which:

€ 224bn in 2014

Of which:



Europe 76bn +2%



Leather goods 65bn +4%



Americas 72bn +3%



Clothing 54bn +2%



Asia-Pacific 47bn +1%



Jewellery and watches 52bn +1%



Japan 18bn +2%



Beauty products and perfumes 45bn +2%

+2% on 2013

Growth estimates for 2015: +13% (1-2% at constant exchange rates),

and €253bn turnover.

Source: Bain & C. Fondazione Altagamma, Worldwide Luxury Market Monitor, October 2014 and 2015 4

Travel shopping: what happens when tourists fill their suitcases

Europe is the continent most reliant on tourist shopping, followed by the Americas.

In Europe, the decrease in purchases by residents was offset by the continuing expansion of tourist shopping, which was more than half of the total. Chinese buyers accounted for approximately 36% of the total tax free shopping market, up 16% with respect to 2013, offsetting the decrease in spending by the Russians down 10%, still in second position with 9%.

Tax-free shopping in the first nine months 2015:

Also in Italy the Chinese were the top spenders with 32% of the tax-free shopping (with Milan as the favourite destination followed by Rome) ahead of the Russians (13%) and the Americans (8%).

+19% in Italy

Tax-free shopping in Europe is estimated at around €48bn in 2015 and is mainly concentrated in four Countries, i.e. France, Germany, U.K. and Italy, which represent overall 74% of the European market.

Source: data compiled by Global Blue, October 2015. 5

+26% in Europe

Half the market is monobrand …

Fashion retail:  Wholesale: wholesale via third-party distributors

47%

 Retail: own monobrand or third-party licencees

105bn

Single-brand stores accounted for 53% of the luxury market: the top players are committed to strengthening the monobrand retail segment, including through direct sales (flagship stores), in the most prestigious locations. This allows for enhanced image control and service quality and support for price positioning on the market, increasing the perception of exclusivity and aesthetic-aspirational value by the buyer.

53% 119bn

Global personal luxury goods market

Monobrand

Multibrand

Source: Bain & C. Fondazione Altagamma, Worldwide Luxury Market Monitor, October 2014 and 2015. 6

… but the other channels are growing faster

Global on-line sales in 2014 were around €12bn: this is the sales channel expected to grow faster with the highest growth estimates for 2015, up 40% (reaching approximately 7% of the total value of the luxury market from the current 5%).

Global outlet sales accounted for approximately €19bn and they are expected to grow by another 35% in 2015, to reach approximately 10% of the total value of the market from the current 9%.

Global sales in airports were approximately €11bn and they are expected to grow by another 29% in 2015, to reach approximately 6% of the total value of the market from the current 5%.

Source: Bain & C. Fondazione Altagamma, Worldwide Luxury Market Monitor, October 2014 and 2015 7

Italian fashion seen by the Mediobanca Research Area Section 2

8

Italian fashion: map and compass 

“Top15”: economic analysis of Top15 Italian fashion Groups per sales (Clothing-Eyewear-Leather goods) between 2010 and 2014 (included first nine months 2015). 

 





“143 Italian fashion companies (Top15 included) with sales of at least €100mln, between 2010 and 2014: 

Who they are 

Armani



Benetton (SpA)



Calzedonia



D&G



Lir (Geox)



Luxottica



Max Mara



Moncler



OTB (Diesel)



Prada



Safilo



Salvatore Ferragamo



Tod’s



Valentino



Zegna





Seven are listed on the stock market



Two are international-owned: Valentino (Qatar) and Safilo (Dutch holding company) “I’m here but you can’t see me”: Gucci and Bottega Veneta (Kering Group)

9

Sector 

59 clothing



32 leather goods



20 textile



11 gold and jewellery



5 eyewear



16 retailing

Where 

56 North West



55 North East



32 Rest of Italy

Ownership 

99 Italian



44 non-Italian (18 French)

Sixteen are listed on the stock market

Fashion: the elixir for growth … Kpi (key performance indicators): Top15, Italian fashion companies and manufacturing companies

Italian fashion companies grow more than manufacturing. Top15 and fashion companies better than manufacturing for sales, margins and employment.

% sales 2014-10 34.2 30.8 27.7

26.0

25.1

16.3

14.1

Net sales Top15 Italian fashion

22.7

Ebit Italian fashion companies

14.0

Employees Large Italian manufacturing a (net of Chrysler's effect)

10

… and to become more robust KPIs (key performance indicators): Top15, Italian fashion companies and manufacturing companies

What most clearly distinguishes fashion companies from large Italian manufacturing companies is their financial structure. They are more capitalized and “liquid”.

12.3

140.4

118.2 9.3 73.7

6.0

50.8 36.8 23.4 Top15 Italian fashion

EBIT margin (2014 %)

Italian fashion companies

Borrowings/equity (2014 %)

11

Large Italian manufacturing

Liquidity/borrowings (2014 %)

The Italian fashion “Top 15" Section 3

12

The fashion "top 15": figures … Net sales 2014 (€m) Aggregate turnover €27.8bn (up 5.6% on 2013 and up 30.8% on 2010)

7,652

Gucci (net sales 2014: €3,497m) and Bottega Veneta (net sales 2014: €1,131m), Kering Group.

3,552 Benetton Group: €1,633m

13

934

Lir (Geox)

721

694

Moncler

966

Valentino

1,045

Tod's

1,179

Safilo

1,210

Zegna

1,296

Benetton (SpA)

1,310

Max Mara

1,321

Ferragamo

1,536

OTB (Diesel)

Calzedonia

Armani

Prada

Luxottica

1,847

D&G

2,535

… and sectors Net sales 2014 (€ bn e % of total) 46% 12.7

32%

8.8

11%

10%

2.9

2.8 1% 0.6

Clothing

Eyewear

Leather goods

14

Shoes

Royalities and other revenues

The Italian fashion industry’s creative hands: lots of them, and growing Employees (average number) in 2014 75,575

Aggregate labour force: 176,887 staff (up 9% on 2013 and up 34.2% on 2010)

30,705

Gucci (labour force 2014: 9,623 staff) and Bottega Veneta (labour force 2014: 3,212 staff), Kering Group.

Benetton Group: 9,429 staff

15

4,294

4,239

4,113

3,764

3,011

2,477

1,407

Tod's

Lir (Geox)

Ferragamo

Benetton (SpA)

Valentino

Moncler

5,670

Max Mara

6,286

OTB (Diesel)

7,609

Safilo

7,663

Zegna

Armani

Prada

Calzedonia

Luxottica

8,112

D&G

11,962

Eleven on the pitch and four on the bench: strong team away from home % non-Europe net sales, 2014 Top15: European net sales €12.1bn, non-European €15.7bn 80.3

European net sales: up 4.6% on 2013 and up 14.9% on 2010

73.1

72.6

Non-European net sales: up 6.4% on 2013 and up 46.4% on 2010

63.6 58.7

57.7

55.7

56.3

55.2 48.5

47.7

44.9 34.0 22.9 9.0

16

Top15

Calzedonia

Benetton (SpA)

Lir (Geox)

Max Mara

Tod's

Moncler

OTB (Diesel)

D&G

Armani

Valentino

Safilo

Prada

Zegna

Ferragamo

Luxottica

1.1

Margins are “luxury” too

Boom in ebit margin in 2010-14: Moncler, Valentino and Ferragamo.

18.1 17

9.5 9.3

8.9

-6.0

Top15

Lir (Geox)

0.9

6.9 2.3 OTB (Diesel)

5.4 Valentino

Fashion companies

2014

Benetton (SpA)

2010

D&G

Safilo

Calzedonia

Max Mara

Zegna

Luxottica

Tod's

Armani

Ferragamo

Prada

Moncler

-3.0

6.3 6.8

6.5

9.6

12.8 12.3

17.0 7.6

9.3 8.1

8.9 10.1

12.6 15.3

20.3 15.6

15.9 16.3

18.6

In 2010 Prada, Moncler and Tod’s ranked first, with EBIT more than 20%. Ferragamo, which ranked third in 2014, had come in eighth in 2010.

11.3

20.8 19.9

20.7

29.8

ebit margin, 2010 and 2014

Roi 2014

18

5.9 3.4 5.4 5.5

D&G Valentino

Lir (Geox)

16.0 15.0

13.1 13.0 12.7 10.0

Top15 Fashion companies

-1.5 -1.4

1.7 0.6

3.0 0.5

6.4 4.2

Safilo

Benetton (SpA)

Roe 2014

OTB (Diesel)

6.4 4.6

9.3 7.3

20.0 17.7

20.1

17.8 13.6

10.5 7.8

Max Mara

Calzedonia

Zegna

Luxottica

Tod's

Prada

Armani

Moncler

Ferragamo

26.0

31.6

37.8

45.1

50.6

Return on capital invested (ROI) and equity (ROE)

Ferragamo and Moncler the best for ROI and ROE. Armani third, Prada fourth.

Top15 better than Italian fashion companies.

The fashion “ top 15” is “out of fashion”: low borrowings and … % borrowings on equity, 2014 55.8

The financial structure of the Top15 was even more solid than the 143 fashion companies, with financial debt in 2014 representing just 23.4% of equity (down from 35.3% in 2010).

50.0

Best of all: Armani, Max Mara and Tod’s. 36.8

12.3

D&G

Benetton (SpA)

15.1

17.3

28.0

28.1 23.4

18.7

19

Fashion companies

Top15

Moncler

Luxottica

Zegna

Ferragamo

Safilo

Calzedonia

Valentino

Prada

4.4 Lir (Geox)

Max Mara

11.9

12.2

OTB (Diesel)

2.0

Tod's

1.9 Armani

23.6

25.8

… lots of cash % liquidity on borrowings, 2014 The fashion Top15 had €5.9bn liquidity in 2014, down from €3.7bn in 2010.

2,502.2

The Top15 had the highest ratio of cash to financial debt: at 118.2% in 2014, liquidity was 1.2 times the level of debt (below 100% in 2010). 1,921.6

52.6

44.9

35.2

28.9

15.2

Moncler

Valentino

Safilo

Benetton (SpA)

Calzedonia

20

118.2 73.7

Fashion companies

58.9

Top15

67.7

Luxottica

Prada

OTB (Diesel)

192.3 136.2 135.6 Zegna

298.6

Lir (Geox)

360.0

D&G

Tod's

Armani

Max Mara

461.8

Ferragamo

Best performers: Max Mara and Armani.

Financially solid despite the value of the “brands” % borrowings on tangible equity, 2014 3,770.7 Even if we look at equity excluding intangible assets (almost half of which consists of the brand value), the balance sheets of the Top15 seems more solid than the average of the Italian fashion companies: 42.4% against 63.3% in 2014. Best performers: Armani and Max Mara, together with Tod’s. Moncler and Luxottica appear to be more fragile, being the only ones with financial debt exceeding tangible equity (respectively 38 and 13 times).

16.4

18.8

19.8

25.2

27.4

29.7

33.7

74.9

78.6

Max Mara

Tod's

D&G

Lir (Geox)

Benetton (SpA)

OTB (Diesel)

Prada

Calzedonia

Ferragamo

Zegna

Safilo

Valentino

21

42.4

63.3

Fashion companies

13.9

Top15

5.8

Moncler

2.5

Luxottica

2.4 Armani

1,277.9

Online sales growing, but stores never go out of fashion POS (direct and indirect) and their geographical location, 2014 2,704

2,186 1,225 518

477

Armani

748

Geox

643

629 594

373 270

525

298 227

35

Ferragamo

Prada Total

340

Zegna Direct

164 176 D&G

325 232 Tod's

Moncler

61.0 50.9

42.3 37.4

52.2

46.4 36.6

36.1

33.5 24.424.7

20.3

41.7

21.7

17.5

41.1 31.0 27.9

Geox

37.4

33.5

5.5

3.6 Ferragamo

Prada Europe (%)

1)

172 134 38

Indirect

62.9

Armani (1)

93

Zegna

Americas (%)

Directs. 22

Asia-Africa (%)

D&G

Tod's

10.4

Moncler (1)

“Top fashion” not outstanding on stock market but few listed companies “TopModa” and stock market Market capitalization of industrial companies (MTA market) down 2.8% in 2014-13 and up 20.8% in 201514. In both periods only Geox and Luxottica outperformed the market. Market capitalization (1) End 2010 € mln

End 2013 € mln

End 2014 € mln

% change

10,542

18,509

21,446

2014-13 15.9

Prada (3)

n.q.

13,883

13,285

Salvatore Ferragamo (4)

n.q.

4,653

M oncler (5)

n.q.

Tod's Geox

End 2015 € mln

% change

29,140

2015-14 35.9

-4.3

7,321

-44.9

3,432

-26.2

3,697

7.7

3,860

2,761

-28.5

3,241

17.4

2,266

3,705

2,201

-40.6

2,248

2.1

888

686

697

1.6

1,063

52.5

Safilo Group

752

1,059

670

-36.7

678

1.2

Total

n.c.

46,355

44,492

-4.0

47,388

6.5

Total net of Prada (6)

n.c.

32,472

31,207

-3.9

40,067

28.4

Luxottica Group (2)

(1) Calculated excluding own shares. (2) Listed on NYSE too. (3) Listed only in Hong Kong since 2011. (4) Listed since 2011. (5) Listed since 2013. (6) Calculated excluding Prada, listed in Hong Kong. Percentage on total Italian industrial capitalization was 10.7% in 2014 and 11.4% in 2015.

23

The top 143 Italian fashion companies Section 4

24

What they do, where they are and who controls them Net sales in %, 2014 Jewellery 3.9 Retail 10.9

Eyewear 16.8

Tessile 5.0

North East 48.2

The “Top15" equals 54% of fashion Italian manufacturing companies’ net sales and 72% of profits. Clothing 41.5 North West 31.5

Centro, Sud e Isole 20.3

Leather goods 21.9 Paese France USA Spain Holland UK Germany Japan Qatar Switzerland Australia Denmark India Sweden Thailandia Total

Foreign ownership 25.2 Italian ownership 74.8

25

N. società 18 4 3 3 3 2 2 2 2 1 1 1 1 1 44

Sales and exports Net sales (€m) and exports %, 2014

58,098 90.2

43,486

70.1

65.8 60.1

56.6

68.1

24,116

36.3 40.5 14,612

12,750 9,730 6,337 11.1 Clothing

Leather goods

Eyewear

Retail

2,924

2,241

Textile

Jewellery

26

Italian ownership

Foreign ownership

Fashion companies

Taste for “Italian style” is increasing … % non-domestic net sales, 2010 and 2014

90.2

72.5

70.1

68.1

65.8 61.4

60.6

60.1

58.0

56.6

50.3

49.3

40.5

36.3

29.1

26.8

11.1 5.6

Eyewear

Leather goods

Textile

Clothing

Jewellery 2010

27

2014

Retail

Italian ownership

Foreign ownership

Fashion companies

… until the domestic decline is addressed % change 2014-2010 50.8

Jewellery

40.0

Leather goods

Net sales 28.0

23.8

23.8

Eyewear

Clothing

Textile

30.3

26.9

27.7

Retail

Foreign ownership

Italian ownership

Fashion companies

9.5

13.4

16.3

Domestic net sales

26.4 8.2

6.0

7.5

2.6 -3.6

Jewellery

Leather goods

-54.2 Eyewear

Clothing

Textile

Export net sales 110.2

Jewellery

60.0

59.3

Leather goods

Eyewear

Retail

Foreign ownership

34.3

Clothing

Textile

28

Fashion companies

49.0

52.6

Italian ownership

Fashion companies

132.3 76.7

42.2

Italian ownership

Retail

Foreign ownership

Excellent choice of sector to which to send a CV % change 2014-2010 137.3

Ebit

60.1

53.1

36.9

35.7

23.0

25.1

Italian ownership

Fashion companies

3.4 -3.6 Jewellery

Textile

Eyewear

Leather goods

Clothing

Retail

Foreign ownership

Dipendenti

36.1

27.1

24.2

20.7

10.9 2.9

Leather goods

Clothing

Eyewear

Retail

22.7 16.6

Textile

29

0.0

Jewellery

Italian ownership

Foreign ownership

Fashion companies

Bottom line: 2014 the best year ROE %, 2014

16.9

13.8

12.2 7.8

6.1

10.1

9.5

10.0

Italian ownership

Foreign ownership

Fashion companies

0.7 Leather goods

Jewellery

Eyewear

Leather goods

Clothing

Textile

Clothing

Retail

Eyewear

Textile

Jewellery

Retail

Total

171

38

12,803

2010-2014 Profits fashion companies (€m)

Profits fashion companies (€m)

4,737

4,663

2,717

477

2010

2011

2012

2013

2014

Total

2,251

2,598

2,802

2,273

2,879

12,803

30

Borrowings: a complete “stranger” Debt equity ratio (borrowings as % of equity), 2014 94.0

61.2 55.7 48.9 36.7 26.6

Clothing

Leather goods

Textile

36.8

33.2

31.4

Eyewear

Jewellery

Retail

31

Italian ownership

Foreign ownership

Fashion companies

Cash: a pillow to sleep on, or a launchpad to something else? Liquidity % of borrowings, 2014 111.4 89.1

80.6

73.7

66.5 52.3 26.2

Clothing

Leather goods

Liquidity (€m) 2014

Textile

Eyewear

Retail

25.8

18.7

Jewellery

Italian ownership

Foreign ownership

Fashion companies

Clothing

Leather goods

Eyewear

Retail

Textile

Jewellery

Total

4,579

1,702

1,636

449

395

58

8,819

32

Not everyone knows that …: average age of the equipment Plants’ average age, in years, 2014 19.7

10.9 8.9

9.0

Eyewear

Clothing

12.0

11.2

9.0

9.2

Fashion manufacturing companies

Fashion companies

8.6

6.2

Leather goods

Retail

Jewellery

Textile

Italian Foreign ownership ownership

Plants’ average age in Italy in 2014: 19.1 years (Mediobanca Research Area, Aggregate data of 2055 Italian companies, August 2015)

33

A good class: 7 out of 10 with top marks on their school report R&S-Unioncamere scoring based exclusively on financial and general data; expression of earnings/ financial solidity, 2014

69.2

School reports for Fashion top15 even better: all INVESTMENT GRADE class.

23.1

7.7

Investment grade (>= BBB-)

Middle class (>=BB-