Prada

Background information

Fashion and leather goods group Prada’s extraordinary rise was driven by the power couple at its helm – Miuccia Prada and Patrizio Bertelli -but the company has roots reaching back 100 years. In 1913, Mario Prada opened a luxury leather goods store with his brother Martino in Milan’s Galleria Vittorio Emanuele II – one the world’s first indoor malls, located between Milan’s gothic cathedral, the Duomo, and the city’s famed opera house, the La Scala Theater. The store soon caught on with European aristocrats and other wealthy elite, selling leather handbags, travelling trunks, leather accessories, beauty cases, and the like. By 1919, Prada had become an official supplier to the Italian royal family – the Savoias – who were later banished after Italy became a republic in 1946. Miuccia Prada – a granddaughter of Mario Prada – took over the family business in 1978. Her partnership with a young leather goods entrepreneur, Patrizio Bertelli, transformed the company over the decades that followed. With Miuccia Prada spearheading the creative end and Bertelli steering business, Prada grew from a small leather goods company with a single store to a highly influential, global luxury fashion conglomerate with net sales of 3.3 billion euros across 70 countries in 2012. Prada’s path to glory began in the 1980’s, when Bertelli and Miuccia Prada pushed the label’s wholesale distribution to upscale department stores, and opened a handful of directly owned stores in major international cities. A shoe line was introduced in 1984, and the company’s first women’s ready-to-wear runway show was staged in 1988. Meanwhile Bertelli and Prada married in 1987. In the early 1990’s, Miuccia Prada began to win influence with fashion editors and to pick up serious accolades, including two CFDA awards, for accessories in 1993 and as “designer of the year” in 1995. The edgier, fashion forward line MiuMiu – a nickname for Miuccia – was launched in 1992, and men’s ready-to-wear in the mid-1990’s. Revenues reached US$210 million by 1994, with clothing accounting for 20% of the total. Sales had tripled by 1997 to US$674 million. In 1999, Bertelli launched an acquisition spree seeking to create a portfolio of leading luxury brands, in an era that saw the rise of luxury conglomerates LVMH and the Gucci Group, and Francois Pinault began snapping up major luxury brands to round out PPR (now “Kering”). In the space of a year, Prada bought control in Helmut Lang’s New York-based company, the German minimalist fashion house Jil Sander A.G. and British shoe maker Church & Company. Prada also formed a joint venture with De Rigo group to introduce Prada eyewear. In addition, Prada also took a 25.5% stake in Fendi S.p.A. in a joint bid with LVMH that gave the two companies 51% of the ailing Rome-based fashion fur label. Prada’s revenues ballooned, but so did its debt. Prada hoped to improve its financial position by floating 30% of the company on the Milan Stock Exchange in June 2001, but withdrew its IPO plans as luxury goods spending slowed in the US and Japan. Prada sold its Fendi stake to LVMH the same year, and by 2006, Prada had also ceded Helmut Lang and Jil Sander. Prada later sold a 45% stake of Church & Company to Equinox. With a pared down portfolio of brands – Prada, MiuMiu, Church’s and Car Shoes – Prada has focused on expanding its network of directly owned stores in recent years, especially in fast-growing markets like Asia, which represented about half of sales volume by 2012. Prada posted a banner year in 2010, and the group finally listed on the Hong Kong Stock Exchange in June 2011. Prada has also tapped a lucrative market in economically troubled Italy and Europe in recent years by focusing on rich travelers from abroad to Western tourist destinations. In a March 2011 financial presentation, Prada even said Europe and the US were not mature markets for them because of a boom in travelers from growth areas – especially Chinese, Japanese, other Far Eastern countries, Russians and Brazilians. When Prada opened 75 stores in 2011, two thirds were in the US or Europe. In 2012, Prada’s turnover in Europe rose 36% compared to 33% growth for the Asia Pacific region. The group opened another 78 stores in 2012, racking up a total of 461 stores as of January 31, 2013. Prada’s wholly owned retail channels have become so strong, they represented 82% of total sales for the group in 2012. Meanwhile, wholesale revenues grew by nearly 10%, even though Prada has been pruning its indirect channels. Miuccia Prada’s creative fashion prowess has molded the Prada brand image and won mind share like few other luxury labels, yet leather goods remain the core business driver, as customers don the brand’s glamorous halo by investing in the hardy handbag. In 2012, leather goods revenue soared 42.7%, while clothing and footwear grew by 9.9% and 11.7% respectively.

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