Prada Buys Versace: Third Time’s the Charm?
On April 10, the fashion industry woke up to another shake up: Prada struck a 1.375 billion dollar deal to acquire Versace from Capri Holdings, owner of Michael Kors and Jimmy Choo. Although major news, it did not come as a surprise since there were rumours weeks before the official announcement that Prada Group were eyeing for an acquisition. This also comes right after another big announcement from Versace: Donatella Versace exited her creative director role at the brand after a nearly three decades reign since taking over after her brother’s death. Essentially, within a month, Versace had a complete overhaul from both the business side and the design side. What does this acquisition signal for the luxury market? And will it finally mark Prada’s breakout success in M&A, or echo past missteps?
Prada wins big with Miu Miu
Prada has come out recently as one of the biggest winners in the luxury market, outperforming its peers like LVMH and the Kering group. Zooming into the financials: Prada Group retail sales grew 18% year over year to $5.4 billion, mostly bolstered by Miu Miu sales, which grew 93%. Net income looks even better with 25% year-over-year growth, clocking in at $951 million. Prada’s performance starkly contrasts with competitors like LVMH, which had a tough year in 2024. The largest conglomerate that owns both Louis Vuitton and Dior only gained 1 % in sales, whereas in 2023, the firm saw 13% annual revenue growth. Kering Group is in an even worse position, experiencing a full-blown downturn, losing 12% in sales in 2024. The only major brand outperforming Prada is Hermès, which enjoys unparalleled pricing power.
Prada Buys Versace at Discount
Before we talk about Prada’s acquisition of Versace, we need to review Prada’s tumultuous acquisition history. In 1999, Prada attempted a triple acquisition, buying Helmut Lang, Jil Sander, and the footwear brand Church’s—all at the same time. Both Helmut Lang and Jil Sander were extremely influential during the ’90s and helped make minimalism the new sensation. Unfortunately, Helmut Lang and Jil Sander did not perform as expected, forcing Prada Group to sell them in the early 2000s. Church’s is the only brand that lasted in the group, though with minimal financial success. The painful acquisition experience completely cut off Prada’s buying appetite, with zero brands acquired since 1999. Thus, Versace’s acquisition marks an important step for the burgeoning fashion conglomerate.
Versace was first acquired by Capri Holdings for nearly $2 billion in 2018. Compared to what Prada is paying now, Capri is taking a significant loss. In fact, the initial asking price for Versace was $3 billion, which undoubtedly was a highball. Versace suffered continuous losses since joining the group, losing 11% in sales just in the last quarter and is currently operating at a loss. Some attribute the failure to the group’s strategic error of mass licensing the Versace name, which ultimately diluted its brand equity.
Third Time’s the Charm?
Courtesy of New York Times
At the final price of $1.38 billion, Prada definitely got a good deal from Capri. Versace currently earns about $1 billion in sales, meaning the ticket price is a mere 1.4 times revenue, while Prada itself trades at 3 times revenue. Though we must factor in the reality that Versace is not profitable, significantly lowering its upside. If Prada fails to revamp the iconic brand, it could lead to another Jil Sander situation. Prada has already placed a new designer — Dario Vitale — to lead Versace, who is currently the design director at Miu Miu. It’s quite obvious that Prada got a sweet taste from Miu Miu’s successful pivot to catering to the youth and wants to replicate the exact same effect with Versace. Logically, it makes a lot of sense, since Versace was always this sexy, mean, youthful brand that didn’t fall into the traditional luxury lane like Dior, which exalts elegance instead of party-girl glamour. One is much more likely to wear Versace to a club than Dior and definitely not Prada.
Dario Vitale | via Vogue
The current state of Versace is nothing but bad merchandising. Although I was never a fan of Versace’s recent runway shows under Donatella, I could still appreciate the garments. But stepping into any Versace store, you’ll realize that the clothes are nothing close to what is being shown on the runway. What’s in-store are racks of basic silhouettes with variations of the Versace baroque print slapped on along with the random placement of the iconic Medusa head. If someone were to pull a ready-to-wear item from the early 2010s and compare it to what’s being sold right now, they would likely look like they came from the same collection.
Prada’s purchase of Versace is bold, calculated, and potentially transformative. It signals that Prada is not only confident in its current momentum, driven by the meteoric rise of Miu Miu, but also ready to stake a claim as a serious player in fashion’s M&A landscape. The discounted price gives Prada breathing room to experiment, but Versace’s lack of profitability means the clock is ticking. With new leadership in place and a clear playbook based on Miu Miu’s youth-oriented revival, the next few years will reveal whether this acquisition is a comeback story for Versace or another chapter in Prada’s acquisition misfires. For now, the fashion world watches and waits: will third time truly be the charm?
Featured Image Courtesy of Prada