Will the devil wear Versace? That’s the question del giorno on the cobbled streets of Milan’s fashion district after Prada, Lucifer’s brand of choice, announced last week that it had bought Versace for €1.25 billion.
Many think the acquisition will fail, pointing out that the two brands could scarcely be more different. Miuccia Prada, the design powerhouse behind her eponymous label, is a former communist whose collections are avant garde and come mainly in her favourite colour: grey. Versace is all golden glitz, with trousers slashed up to “here” and shirts open down to “there”. And that’s just the menswear.
“Versace and Prada are two worlds apart,” says Jonathan Siboni, chief executive of Paris-based Luxurynsight, the sector research analyst. He adds that commercially Versace “is all but dead”.
Under the leadership of its former US owners, Capri Holdings, who raised prices and dialled down the label’s trademark razzle-dazzle exuberance, Versace’s annual sales have slumped to a meagre $810 million, making it a minnow in the $1.7 trillion global luxury goods business. Prada will need to restructure the business. That won’t be cheap and Prada will have to pull it off during a trade war, which many economists argue will trigger a prolonged global slowdown, notably in the crucial Chinese luxury market.
Lorenzo Bertelli — the eldest son of Miuccia Prada and her husband Patrizio Bertelli, Prada Group chairman and executive director — who is the group’s chief marketing officer, mocks the doubters. “You don’t have to be a fashion expert to realise that the aesthetics of Prada and Versace are very different,” he says. So how could Prada make Versace great again?
Lorenzo, 36, offers few clues. “What we need are a few smart changes and to be patient,” he says. Analysts argue there are some obvious high-margin gaps Versace could fill.
Versace has never created an “It bag”. There is no branded make-up. It is also weak when it comes to shoes, which is odd for a label whose former chief creative officer and now brand ambassador, Donatella Versace, is so fond of stilettos she says: “I never wear flats. Every time I wear them, I fall over.” Prada has a strong leather goods supply chain for shoes and bags that will help Versace to fill the bags and boots gap.
Those close to Versace — and Prada — concede that Versace’s recent financial performance has been weak but they point out that its maximalist aesthetic and storied history mean its global brand is strong. Surveys rank the label among the top ten most well-known names in luxury. “Everyone remembers the Elizabeth Hurley safety-pin dress and Jennifer Lopez’s jungle print gown,” company executives point out.
They add that Versace boasts a prime property portfolio with boutiques on the world’s most chichi shopping streets. What’s more, Versace brings to Prada a broader lifestyle offering. It boasts homewares and hotels, whose interiors are so bling you have to wear sunglasses indoors.
Versace executives have welcomed Donatella’s successor as creative director, Dario Vitale, who took over this month. He has a strong pedigree. He joined from Miu Miu, Prada’s younger sister brand, where he served as design director of ready-to-wear and head of image and helped to make it the hottest label in international fashion for the past three years. Miu Miu sales nearly doubled last year to €1.37 billion.
The question many are asking is: will Vitale dial back up Donatella’s trademark Italian baroque meets South Beach camp style, ditching Capri Holdings’ more sober aesthetic?
It’s tempting to tone things down during a period of economic crisis when logo-free “quiet luxury” brands, such as Loro Piana and Brunello Cucinelli, are on a tear. But those who have worked at Versace say that Prada, of all owners, should know how risky it is to mess with a label’s DNA.
One executive explains: “Prada have used the edgy, modern image and style of Mrs Prada herself to make Prada what it is today: Italy’s modernist superbrand. They should harness the image, aesthetic and talent of Donatella, even in her new more ambassadorial role, to retain what makes Versace, Versace. People don’t go into a Versace boutique for minimalism. They want it loud.”
There is more than just the future of Versace riding on whether Prada can revive Versace. The future of the Prada Group and the structure of Italian fashion as a whole are on the line. Prada Group comprises Prada, Miu Miu, Britain’s Church shoes and now Versace. It used to own Jil Sander and Helmut Lang and had a significant stake in Fendi but Patrizio Bertelli, who made those acquisitions starting at the end of the 1990s, sold them all after a few years admitting buying them was a “strategic error”.
Buying Versace is a second attempt by Prada Group “to become a leading Italian luxury conglomerate in a market that is dominated by French groups,” says Achim Berg, a fashion and luxury industry adviser. Although Italy accounts for half of luxury fashion production, the country lacks a group with the scale and heft of France’s LVMH, one of Europe’s most valuable companies, and Gucci-owner Kering.
Prada is not saying why it believes its new expansion strategy will work better than its previous attempt but analysts point out that it has picked up Versace for a song. Capri Holdings, parent company of Michael Kors and Jimmy Choo, paid €1.83 billion to buy the company from the Versace family and Blackstone seven years ago. Capri had hoped to create America’s first luxury fashion group by merging with Tapestry, owner of Coach, Kate Spade and Stuart Weitzman. But the deal was blocked by the US Federal Trade Commission last year, prompting Capri’s decision to sell Versace.
Analysts add that Prada Group has plenty of cash to invest. It is listed in Hong Kong, with a market capitalisation of €14 billion. Since the pandemic, sales at Prada and Miu Miu have continued to grow despite a downturn in the overall luxury market. Revenues rose 17 per cent to €5.4 billion last year.
John Hooks, the British-born executive who was the global commercial director of Jil Sander when Prada bought it, sees the aesthetic differences between Versace and Prada as an opportunity, not a hurdle. “Prada bought Jil Sander and Helmut Lang because they admired their creativity, loved the product and wanted to be in on it. But those brands’ style was very similar to Prada’s. Prada ended up speaking to the same consumer as Prada which became a problem. That won’t happen with Versace.”
Siboni points out that Prada’s top management has been overhauled, not just by the elevation of Lorenzo Bertelli as heir apparent but by Patrizio Bertelli’s decision to stand aside for a new chief executive, Andrea Guerra. A new finance boss has also been appointed to create “a better run and better structured company.”
A seasoned Prada observer explains: “Patrizio is a genius but also a crazy guy who could be crazy hard to work for. He was mercurial, hyper-demanding and could not speak English. The new leadership is still creative but more measured, more international and data driven. It has a better chance of integrating a new brand into the group.”
If Prada does succeed in bringing Versace back from the brink, it raises a tantalising question. Aged 90, Giorgio Armani is unlikely to remain at the helm of his $7 billion eponymous brand for much longer. Those close to him say he would prefer his empire to remain in Italian hands. Even though he has dismissed Prada as “elite, snob fashion” and recalled that Gianni Versace once told him Versace “dresses sluts”, could he be tempted to sell to Prada Group?
