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Prada (Italy)

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The Prada empire, now worth over €3bn in annual sales, was built on a bag. After more than 70 years as a small leather goods business, the company was catapulted into the big league in the late 1980s when its finely woven black nylon handbags became the fashion accessory for the international style set. However subsequent attempts to build the business into a multi-brand global luxury group to rival the likes of LVMH proved patchy at best. Plans to float the group's shares were also prepared and cancelled on several occasions as a result of market turbulence or fluctuating performance. Finally, though, Prada did manage to get its IPO away in Hong Kong in summer 2011. It was arguably worth the wait, becoming the most successful float by any fashion group since the late 1990s. However, the company's performance has weakened considerably since 2014, partly as a result of China's economic slowdown.


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Still greatly admired by fashion cognoscenti for its elegance and style, Prada remains one of the few major labels which retains its independence. But this has proved something of a struggle at times. Husband-and-wife owners Patrizio Bertelli and Miuiccia Prada attempted during the 1990s to broaden their company into a multi-brand luxury empire, but the exercise proved both costly and unsuccessful, and the group struggled under hefty debts even while its core brands prospered.

The main Prada brand now covers a wide range of ready-to-wear apparel as well as home furnishings, but its main revenue stream comes from accessories, especially its hugely popular and desirable bags and shoes. The label's position as the epitome of high fashion was reinforced by the book (and subsequent film) The Devil Wears Prada, a thinly disguised portrait of American Vogue editor Anna Wintour. A lower-priced diffusion line, Miu Miu, named after designer and co-owner Miuccia Prada, was launched in the late 1990s. The Prada Sport denim collection was introduced in 2004. All Prada-branded goods are still manufactured in Italy. Combined sales for the main Prada brand were a little under €2.5bn in 2017, including around €800m for Prada menswear. (That compared to over €2.9bn in 2014.) Miu Miu contributed an additional €459m.

The group has generally avoided licensing deals, preferring to keep full control of all its brand extensions. In 2002 Prada took its first steps into the cosmetics market on its own, before changing tack and establishing a joint venture in 2003 with Puig to develop Prada fragrances and cosmetics worldwide. The first Prada perfume launched in August 2004 with great success. There are now two main fragrance families: Prada Candy for women and Prada Luna Rossa for men. Two additional franchises were introduced in 2015, Prada Olfactories and Les Infusions des Prada, both designed as unisex. In 2016, the brand unveiled its biggest new fragrance launch to-date, twin products La Femme Prada and L'Homme Prada. The first Miu Miu fragrance launched in 2015 in a separate licensing deal with Coty. Prada eyewear is produced under license by Luxottica.

Perhaps the label's most unusual diversification came with the launch of a Prada-branded touch-screen mobile phone in 2007, in partnership with LG. This was steadily rolled out around the world, arriving in Japan for the first time in 2008 through a partnership with NTT DoCoMo. A follow-up, the Prada 2, was launched in 2009, followed by the Prada By LG 3 in 2011. Also in 2011, there was a partnership with Hyundai to produce a limited edition Prada Genesis car for the Asian market.

The group continues to own a small portfolio of other brands, although several business acquired during the 1990s were sold. Currently Prada's other labels include Car Shoe of Italy and traditional English shoemaker Church's. Sales are considerably smaller than the two lead brands at €16m and €82m respectively. German fashion label Helmut Lang was shut down in 2005. Jil Sander was sold in 2006. In a largely personal diversification, the group in 2013 acquired a controlling stake in famed Milanese pastry shop Marchesi, and plans to open branded cafes in its larger Prada outlets.

The group announced and withdrew plans to float part of its equity several times between 2002 and 2008. In 2010, rumours spread through the industry that Prada had been in discussions with Richemont regarding the sale of a minority shareholding to the Swiss luxury group. Those stories were denied by Prada and no deal materialised. In 2010, the group's six main lenders agreed to postpone repayment of €450m of debt until 2012. Prada eventually launched an IPO of around 20% of its shares on the Hong Kong stock exchange in June 2011, raising around €2.1bn in cash and paying off all of its debt.


The group's results following that IPO were impressive. Revenues for the year to Jan 2012 jumped by almost a quarter, followed by a 29% increase in the year to 2013 to €3.30bn. Even at constant currency rates, the increase was 23%. Growth has slowed since significantly then, with the year to 2014 notching up an increase of just 9% to €3.59bn, while net income edged up only 0.3% to E628m (after a spectacular 45% jump the year before). There was an even bigger slowdown in growth during the year ending 2015, with a 1% decline in group revenues to €3.55bn. Net income fell 28% to €451m.

Revenues for the year to Jan 2016 were virtually unchanged at €3.55bn. At constant rates they would have declined by almost 8%. Net income slumped to a new low of €331m. During the financial year, Prada's share price slumped below its original issue price of HK$40 for the first time since 2012. There was another tumble for the year to Jan 2017 to €3.14bn, with net income of €278m.

The group adopted a new calendar financial year in 2017, resulting in an 11-month year from Feb to Dec 2017. On a proforma full year basis, revenues slipped by a further 4% to €3.06bn, while net income fell to another low of €249m. Bertelli has forecast a return to growth in 2018.

The largest proportion of sales by far - around 81% - comes from the group's own retail network of 625 outlets worldwide. Almost two-thirds of these are Prada-brand shops, including several specialised Prada For Men stores. The most impressive outlets are three architecturally spectacular Prada "Epicenter" stores in New York, Los Angeles and Tokyo.

The Asia Pacific region including Japan is the group's biggest market by far, contributing 44% of sales in 2017. China alone contributed sales of €646m and Japan €337m. The group's second biggest country remains Italy. Leather accessories accounted for 57% of retail revenues, or €1.7bn, footwear for €625m and clothing for €624m. Royalties from fragrance, eyewear and mobile phone licenses added an additional €48m.

Despite the IPO, the group is still tightly controlled by Patrizio Bertelli and Miuiccia Prada, who control around 75% of its shares through the Prada Holding entity. They also run the Fondazione Prada, one of Italy's most important contemporary art foundations; and the group's larger retail outlets are known for their cutting-edge architectural designs.


Despite its comparatively recent prominence, Prada has actually been around for more than 90 years. Miuccia Prada's grandfather Mario opened a fine leather goods store with his brother in Milan's Galleria Vittorio Emanuele II in 1913. (The shop is still there). It quickly gained a following among the aristocracy, becoming a supplier to the Italian royal family within six years of opening. By the mid 1970s, though, the small family run business had run into difficulties. Until then Miuccia had chosen to stay out of the business, studying political science and then training as a mime in Milan's Teatro Piccolo. She reluctantly took control of the business from her mother in 1978, and shortly afterwards met Patrizio Bertelli, who ran his own leather goods manufacturing company. (According to legend, Prada's first words to Bertelli when they met for the first time were "You copied my stuff!"). The two became partners, with Bertelli taking charge of the business end, while Miuccia learned the ropes of design.

Performance gradually improved as her design skills developed. The launch of the first Prada handbags in 1985 sealed the company's success. (Prada and Bertelli married two years later). Meanwhile the range gradually expanded from leather goods to a first ready-to-wear collection in 1989. Among Prada's most influential designs were old-fashioned grey skirts, skinny cardigans and stewardess prints, but all her designs managed to counter prevailing trends in the industry towards sex and glamour to present a clean, plain and determinedly idiosyncratic image. Youth line Miu Miu was spun off in 1992.

With the group's prestige at an all-time high in the late 1990s, Bertelli diverted some of his attention to sponsoring a professional sailing team which has repeatedly challenged (unsuccessfully) for the America's Cup since 1997. The Bertellis also began adding to the business through acquisition. The first port of call was Gucci, then Prada's equal in fashion's inner circle. Patrizio Bertelli acquired almost 10% of Gucci with the aim of merging the two companies. However his plan was rebuffed by Gucci CEO Domenico de Sole, and Prada sold its stake to LVMH at a handsome profit. (LVMH went on to make an ever more aggressive assault on the reluctant Gucci).

Instead the Bertellis started snapping up other hot labels, including controlling stakes in German fashion labels Jil Sander and Helmut Lang, traditional English shoemaker Church's, Azzedine Alaia, Genny and Car Shoe. However, Prada found the economic downturn which followed the 1990s boom challenging to say the least. The group accumulated substantial debts of almost €1bn in its acquisition spree. Plans to reduce this burden via an IPO were cancelled on four separate occasions as a result of turbulence in the markets, and instead Prada sold off assets in order to raise cash. In 2001 it sold its shareholding in Fendi, followed by the Byblos label in 2002, and a 45% stake in Church's in 2003 to investment group Equinox.

The most serious troubles were within Prada's two German fashion houses, which between them contributed around 15% of group revenues. Jil Sander quit only five months after her label was acquired by the Bertellis, and the company racked up heavy losses as it lost direction over the following years, requiring frequent injections of new capital. In 2003 the Bertellis were able to persuade Ms Sander to return to the fold for a time, but that relationship fell apart once more a year later. Meanwhile sales of the Helmut Lang label declined sharply between 2002 and 2004. Lang resigned from the business in 2005, and production of its fashion collections were suspended pending sale or closure. The Jil Sander label was sold to private equity fund Change Capital Partners at the beginning of 2006.

Last full revision 17th April 2018

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