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MILAN — Analysts are not buying into the idea that a new Italian luxury pole could emerge from Prada Group’s potential acquisition of Versace.
Following a report on Italy’s Il Sole 24 Ore daily on Friday that speculated that Prada is eyeing Versace, Equita analysts stated that “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 analyst Paola Carboni said Prada’s “management appears focused on organic growth, with still-untapped and important opportunities to catch from the strong potential of Prada and Miu Miu.”
She also believes that, while Prada, with its heritage and expertise in leather goods, could further develop the accessories of Versace, historically strong in couture and ready-to-wear, “the operation would be a challenging turnaround.”
Prada Group was not reachable for comment at press time. Publicly listed in Hong Kong, the company’s shares were not moved by the speculation, closing down 0.4 percent at 60.25 Hong Kong dollars.
Intesa Sanpaolo analysts underscored that Versace is “heavily impacted” by China’s slowdown and that the brand needs to be relaunched. “We can’t rule out [Prada’s potential] interest in acquiring a brand if there are significant industrial synergies, and the group has the financial strength that would allow this, but we expect it would approach a potential deal with a very cautious attitude.”
Backstage at Prada.
Andrew Katz/WWD
“On the positive, one could argue that Versace and Prada cater to very different consumer groups,” said Bernstein’s Luca Solca. “On the negative, Prada has an abysmal past in M&A,” Solca said, citing Jil Sander and Helmut Lang as examples.
Prada chief Patrizio Bertelli bought the two labels in the 1990s shopping spree with the goal to create a luxury pole. He sold both brands in 2006 to focus on Prada and Miu Miu and has candidly admitted the operations did not go as planned and defined them as “mistakes.”
Bertelli has since and so far only shown interest in supporting the manufacturing pipeline and Made in Italy excellence. In June 2023, Prada joined forces with the Ermenegildo Zegna Group to buy a 15 percent stake each in knitwear specialist Luigi Fedeli e Figlio Srl. This followed a first partnership in 2021, when the two companies acquired a majority stake in Filati Biagioli Modesto SpA, which specializes in the production of cashmere and other precious yarns. At the time, Bertelli said the “operation reflects the philosophy that our group has always pursued: direct control of the supply chain at every single stage of the production process, which also allows us to speed up on traceability of raw materials and on the transparency of our supply chain.”
Patrizio Bertelli and Miuccia Prada attend the opening of “Human Brains: It Begins With an Idea” at Fondazione Prada on April 21, 2022 in Venice, Italy. (Photo by Giorgio Perottino/Getty Images for Fondazione Prada)
Getty Images for Fondazione Prad
Prada Group chief executive officer Andrea Guerra has repeatedly said during earnings calls with analysts that the focus was on retail excellence, sharpness of positioning, creativity and communication with the ambition to deliver above-market growth, continuing to expand the Prada and Miu Miu brands. The group also owns Car Shoe and Church’s, which Guerra in March called “an untold jewel,” and said the restructuring of both brands needed to be taken “step by step.”
As reported, the Prada Group is in a position of strength at the moment and bucked the luxury slowdown in the nine months ended Sept. 30. Strong retail sales in all geographic areas, including Asia-Pacific, and an eye-popping jump at Miu Miu, which soared 97 percent in the period, contributed to a 15 percent increase in group revenues to 3.83 billion euros.
As reported, Capri Holdings is said to be working with Barclays to sell Versace and Jimmy Choo as it focuses on the Michael Kors turnaround, stirring yet more speculation in and around Milan. Sources say the contract of Donatella Versace, chief creative officer of the Italian brand, is up in February. The speculation surrounds whether she — or Capri — will renew it.
Donatella Versace attends “The Devil Wears Prada: The Musical” World Premiere at the Dominion Theatre on Dec. 1, 2024 in London. (Photo by Jeff Spicer/Getty Images)
Jeff Spicer/Getty Images
Donatella Versace reached a $2.1 billion deal to sell her family’s company to the-then Michael Kors Holdings in 2018, which subsequently changed its name to Capri Holdings. Capri is widely seen as considering its options for both Versace and Jimmy Choo — and perhaps even for Michael Kors — since the company’s $8.5 billion buyout by Tapestry Inc. was dropped following an antitrust challenge from the U.S. government.
Versace’s first-half revenues fell 22.1 percent to $420 million, but Capri chairman and CEO John Idol recently said the brand could bounce back by “engaging and energizing both new and loyal consumers, broadening our product offering, improving store productivity and returning our wholesale business to growth.”
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