How Prada became the biggest name in fashion
A $2.6bn flotation will strengthen the Italian brand's position at the top of the style tree. Susannah Frankel reports
Tuesday 07 June 2011
While the Western world is still reeling from the effects of the 2008 economic crash, business at Prada, among the world's best-known luxury goods labels, appears to be booming. On 17 June, the Italian fashion house is reportedly planning to price an IPO in Hong Kong to raise up to $2.6bn (£1.59bn). The expected listing price of HK$36.5 to $48 a share values Prada higher than its European peers including even France's largest and most powerful luxury goods conglomerate, LVMH (Louis Vuitton Moet Hennessy).
To this end, and with its eye clearly on the rapidly expanding and highly lucrative Asian market (with the notable exception of post-tsunami Japan), the powers that be at the company were in meetings with potential investors in Singapore yesterday. These will be followed by more in Hong Kong, London, Milan and New York.
According to the fashion trade paper Women's Wear Daily, a 450-page filing with the Hong Kong Stock Exchange reveals that the designer and label's namesake, Miuccia Prada, and her husband, Patrizio Bertelli, Prada's CEO, each own 33.2 per cent stakes in the company and earned €9.7 million and €10 million, respectively, last year, making them among the most highly paid people in international fashion.
So what is their secret? Of course, that is a complex question, but if there is a single characteristic that has led to Prada's increasingly powerful stature in the world it is that, of all its competitors, it has straddled the market to encompass everyone from the most wealthy and fashion-conscious insider to the young and aspirational pretender.
Prada is a household name – there's even a Hollywood blockbuster, The Devil Wears Prada, named after the company – but that has in no way dented its cachet as both innovative and inspiring, and that applies as much to a necessarily elitist python-skin coat as it does to a glossy print advertising campaign, pair of sunglasses or bottle of scent.
Such a phenomenally broad reach is directly attributable to the personalities of both main players, making it that rare thing in fashion: authentic. Miuccia Prada is a profoundly maverick risk-taker and a woman who considers the word "commercial" a back-handed compliment.
Bertelli is a notoriously ruthless businessman who, folklore has it, pressures his wife to design product that sells, whether she considers it strictly chic to do so or not. Their fights – all Italianate gesticulating and so forth – are as legendary as their longevity.
It all started with Miuccia's grandfather, Mario Prada, who founded a business in 1913 supplying glasswear and luggage to Europe's well-heeled. Before entering the family business in the mid-1970s, she earned a PhD in political science, studying at Statale University in Milan – she was, incidentally, a fully-signed up member of the Italian Communist Party at the time. She met Bertelli in 1978. They were married in 1987 and have two sons. "Miuccia was such a first-rate worker and designer," Bertelli once famously said. "I knew it would be cheaper in the long term to marry her."
Such posturing aside, Prada's breakthrough came in the early 1990s in the form of a black nylon bag, complete with the now instantly recognisable triangular metal branding. The first true fashion carryall – in as much as it transformed every season along with any clothes – its utilitarian qualities struck a chord with a new, minimalist-minded consumer who would rather not wear their wealth on their sleeve. It remained the single most desirable accessory of that decade.
In 1988, Prada introduced womenswear for the first time, before launching the more light-hearted Miu Miu label in 1993. In 1994, Prada expanded into menswear. Across all lines, the signature look has rarely been stereotypically glamorous or easy on the eye like that of its Italian competitors. Both clothing and accessories are known for their jolie-laide qualities, investing their wearer with an intelligence and a knowing credibility that is priceless.
It has taken the rest of the world quite some time to catch up with the strangely beautiful Prada aesthetic, not least because Miuccia Prada also has the extraordinary ability to change her viewpoint radically on a six-monthly basis. But catch up it has. Today Prada's runway collections are perhaps the most hotly anticipated on the show schedule. Prada flagship stores and the company's website, designed in collaboration with the architect Rem Koolhaas's OMA, are equally ground-breaking. It has even expanded into cars, with a 2009 collaboration with the South Korean maker Hyundai, the Prada Genesis.
It is believed that for its Hong Kong IPO Prada will sell 16.5 per cent of its share capital. At the upper end of the share price range that would value the group, which also owns Church's Shoes and Car Shoe, at €10.7bn.
The proceeds will be invested in an aggressive expansion programme with plans to open up to 80 stores this year, of which 25 will be in Asia. The company currently has 319 boutiques worldwide.
Miuccia Prada once told me: "Just to do a few, ultra-sophisticated things for the connoisseurs as they are called, for me that's completely boring. You want to be understood by the sophisticated few, of course, but you also have to be more loud somehow, otherwise your message doesn't go through. I am interested in communicating to many people, in communicating to the world. And that's much more challenging."
It seems that Miuccia Prada, with Bertelli at her side, is rising to the challenge.
Rising in the east: Hong Kong's big labels
* Burberry: The British luxury group's profits surged 39 per cent to £298m for the year to the end of March, with Asia now the group's top-selling region. It is seeking a Hong Kong listing that values it at 21.4 times forecast 2011 earnings.
* L'Occitane: the French cosmetics and perfumery company drew strong demand from Asian investors when it listed in Hong Kong in May 2010 – attracting considerable attention from other European groups. It raised $708m, with the shares listing at HK$15.08, at the top end of the indicative range. They now trade at HK$20.15.
* LVMH: Asia has become the fastest-growing market for LVMH brands, including Louis Vuitton and Christian Dior. Moët Hennessy is to plant its first vineyard in China, while the company currently trades in Hong Kong at 17.3 times forecast 2011 earnings.
* Samsonite: The luggage giant is seeking to raise up to $1.5bn in a Hong Kong IPO, with the aim of being listed by 16 June.
* PPR: The owner of brands including Gucci and Bottega Veneta trades in Hong Kong at 13.9 times earnings.
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