Italian luxury brand group Prada may be considering acquiring rival Versace, which is owned by Capri Holdings, according to reports.
Collaborations are all the rage in the luxury world – in fact, LVMH’s Fendi teamed up with Versace three years ago – but Pradas is one partnership that should stay in the design room.
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It’s not hard to see why Prada is interested in the Italian brand founded by Gianni Versace. First, Capri faces a difficult future after its $8.5 billion sale to Tapestry was blocked by a judge last October and the companies abandoned plans to become Italy’s LVMH. It is now widely expected that Mr. Capri will sell Versace.
Michael Kors’ owners acquired the brand from the Versace family and minority shareholder Blackstone Group in 2018, but it remains relatively rare for such assets to come to market. Versace is one of the most instantly recognizable fashion names in the world.
Meanwhile, Prada has undergone a remarkable transformation, with Miuccia Prada’s creative vision reinforced by a top-class management team under CEO Andrea Guerra, with the addition of Co-Creative Director Raf Simons. I tried.
This has improved fundamental aspects of selling luxury goods, such as serving high-end customers. Coupled with the success of Prada’s sister brand Miu Miu, which has become a codeword for cool-girl style, the company has generated sales growth that most rivals can only dream of.
But with 2024 sales of 5.4 billion euros, Prada is still about 30% smaller than Kering-owned Gucci, according to a consensus of Bloomberg analyst forecasts.
The addition of Versace, which is expected to have sales of about $846 million this year, will move Prada closer to its rivals. The additional revenue stream would also come in handy if Miu Miu’s stratospheric growth starts to slow.
Prada is known for its elegant clothing, and apparel remains the bulk of Versace’s business. But Prada’s strong performance in handbags and footwear, the real revenue drivers, could accelerate Versace’s leather products, which are still a relatively small part of the business.
Add in the fact that the two Italian brands can generate cost savings, and this combination has its benefits.
However, there will be some significant hurdles to overcome for this agreement to become a reality.
Capri paid a whopping $2.1 billion for Versace in 2018. Initially, sales expanded, but recently growth has stagnated.
The label is expected to be in the red for the year ending in March.
On the other hand, valuations of luxury goods are sluggish, so prices may become a bottleneck. Versace has regained its composure under former Burberry Group CEO Jonathan Aykeroyd, but more work needs to be done, which will take time and significant investment.
On the surface, that wouldn’t really matter. Versace luxury isn’t the most popular style right now, so Prada has time to develop its division before flashy luxury makes a comeback. But this heavy lifting could prevent Prada and Miu Miu from ensuring their continued success.
The junior label is already facing a future without CEO Benedetta Petruzzo, who was hired by LVMH to become managing director of Christian Dior Couture. And there are other opportunities for Prada, such as bringing menswear to Miu Miu.
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Prada’s last successful acquisition spree in the 1990s failed to live up to expectations. The company acquired Jil Sander and Helmut Lang in 1999, but sold them seven years later. Prada is a very different company today, but it may be reluctant to expand again.
Finally, Versace’s flamboyance seems at odds with Prada’s minimalist chic. Of course, the combination of Miuccia Prada’s creativity and Versace’s Italian charm and incredible archive will be a fashionista’s drool.
Prada could find greater success by adding companies like Jil Sander and Helmut Lang that complement its namesake brand rather than being too similar.
Still, mixing these two aesthetics risks a wardrobe malfunction. And where does Donatella Versace, who has been stewarding Gianni’s estate for the past 30 years, fit in?
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Other luxury brands may also be taking notice of Versace. CEO Bernard Arnault tends to avoid turnaround situations, as his investment in Moncler shows, but they could be attractive to, say, LVMH.
It’s no surprise that Mayhoola, Valentino’s majority shareholder, and private equity firms are interested. Although Kering has a minority stake in Valentino, it is likely to have its hands full dealing with Gucci.
That means there’s room for Versace to make a comeback. But not Prada ©Bloomberg
