Strategic Focus Remains on Prada and Miu Miu Expansion
Analysts are dismissing speculations of the emergence of a new Italian luxury pole as a result of a potential acquisition of Versace by Prada Group. The idea that Prada may be considering acquiring Versace was touted on Italy’s Il Sole 24 Ore daily on Friday. However, analysts from Equita revealed their thoughts on the matter, stating, “we see the acquisition of Versace as a challenging turnaround. Therefore, pending further elements, we believe that Prada’s real interest in Versace is unlikely.”
Equita’s Paola Carboni explained Prada’s management is focussed on organic growth, with numerous untapped opportunities within Prada and Miu Miu due to their strong potential. Carboni suggests that while Prada could potentially expand Versace’s accessory lines with its leather goods heritage, such an operation would still present a significant challenge. Prada Group was unavailable for comment at the time of reporting.
Analysts from Intesa Sanpaolo highlighted that Versace is currently grappling with the impacts of China’s economic slowdown and needs a brand relaunch. It was suggested that while Prada could be interested in an acquisition if industrial synergies were available, the group would likely be very cautious in its approach due to the associated financial commitments.
Luca Solca of Bernstein acknowledges that while Prada and Versace serve different customer groups, Prada has had a tumultuous history with mergers and acquisitions. He refers to Jil Sander and Helmut Lang as examples, brands which were bought and subsequently sold in the 1990s by Prada Chief Patrizio Bertelli in an effort to create a luxury pole that didn’t pan out as expected.
Since then, however, Bertelli has primarily shown interest in enhancing the manufacturing pipeline and promoting Made in Italy excellence. In 2023, Prada forged a partnership with Ermenegildo Zegna Group, acquiring 15% each of knitwear specialist Luigi Fedeli e Figlio Srl. Bertelli’s philosophy, as stated at the time, revolves around maintaining direct control over every stage of the production process, including the traceability of raw materials and supply chain transparency.
Andrea Guerra, Prada Group Chief Executive Officer, has repeatedly emphasized the company’s focus on retail excellence, sharpness of positioning, creativity, and communication towards delivering above-market growth. They are continuing to expand the Prada and Miu Miu brands while maintaining a step-by-step approach towards restructuring its other brands Car Shoe and Church’s.
Currently, Prada Group is in a formidable position. They have been successful in bucking the luxury slowdown over the nine months ending on Sep 30, with all areas, including Asia-Pacific, showing robust retail sales. There’s been an impressive 97% jump at Miu Miu, resulting in a 15% revenue increase to 3.83 billion euros for the group.
Versace and Jimmy Choo are apparently being considered for sale by Capri Holdings, adding to the speculation. The contract of Donatella Versace, the Creative Officer of the Italian brand, is up for renewal in February, further stirring speculations.
In 2018 Donatella Versace sold her family’s company to what was then Michael Kors Holdings for a whopping $2.1 billion. The conglomerate changed its name to Capri Holdings following the deal. Its options for both Versace and Jimmy Choo — and potentially for Michael Kors — are said to be causing widespread curiosity following the failure of its $8.5 billion buyout by Tapestry Inc., due to an antitrust challenge from the U.S. government.
Despite Versace’s first-half revenues falling 22.1 percent to $420 million, Capri chairman and CEO John Idol recently suggested the brand could bounce back by working on consumer engagement, broadening its product offerings, enhancing wholesale growth, and improving store productivity.