Prada Holding B.V. is the holding company for I Pellettieri d'Italia S.p.A., the leather goods business at the heart of the Prada fashion empire, and other related enterprises, such as Church & Company shoes and the Jil Sander line of women's clothes. Time magazine called Miuccia Prada the most influential fashion designer of the 1990s. Beginning with a rugged yet stylish nylon backpack, she developed a signature utilitarian look with odd, muted colors and unusual textures that found favor with trendy working women. Prada's sales quadrupled between 1996 and 2000, when they exceeded L 3 million. The company grew explosively in the late 1990s, both organically and through acquisitions. There were 307 stores worldwide for Prada and its other brands in late 2001; 143 of these were franchises. Prada sells products only from companies it controls.
Miuccia Prada's husband, company CEO Patrizio Bertelli, has earned a reputation as a brilliant and temperamental micromanager. At Prada offices in New York and Tokyo, all office supplies--from desks to staples--must be imported from Italy. Bertelli claims to have personally hired 60 percent of the group's employees. His design mantra, quoted in Fortune: "It is not fashion that changes lifestyles. It is lifestyles that change fashion."
The Prada empire stems from the leather goods store Mario Prada opened in Milan in 1913. In addition to his own wares, he also sold steamer trunks and handbags imported from England to a customer base that included Italian nobles.
Although Mario Prada barred the women of the family from entering his workplace, control of the business followed a matriarchal succession after his death in the mid-1950s. Prada's son Alberto was not interested in the business, so his daughter-in-law ran the store for about 20 years before passing its ownership to her own daughter, Miuccia Prada, who first joined the firm in 1970 before inheriting it eight years later.
Miuccia Prada, the founder's granddaughter, was born in 1949. Her career in fashion design grew from an early interest in clothes and textiles. In spite of, or perhaps because of, her affluent upbringing, she flaunted leftist tendencies, handing out communist leaflets on street corners. She received a doctoral degree in political science in 1973. She also studied mime for several years--perhaps good training for the nonverbal language of fashion.
In 1977, Prada met Patrizio Bertelli, who had started his own leather goods manufacturing firm when he was 17. Prada readily followed the charismatic Bertelli's business advice, which included dropping the firm's English suppliers and revamping old-fashioned luggage styles. Sales were about $400,000 a year when Prada inherited the company in 1978.
A New Look in the 1980s
In 1979, Miuccia Prada designed what would eventually become her first commercial hit--backpacks and totes made of a tough, military spec black nylon that her grandfather had used as a protective covering for steamer trunks. Success was not instant, however. In the next few years, Prada and Bertelli sought wholesale accounts for the bags at exclusive department stores and boutiques around the world. They were a hard sell due to their high price tag and complete lack of company advertising.
A second boutique opened in Milan in 1983, this one a sleek and modern contrast to the original one situated in a historic shopping district, the Galleria Vittorio Emanuele II. A black nylon version of the famous Chanel tote was introduced in 1985. A line of footwear was introduced the same year and the company began opening its own stores in Paris, Madrid, Florence, and New York.
Fashioning the 1990s
A ready-to-wear collection of women's clothes debuted in 1989. Prada's clothing designs were known for their dropped waistlines and narrow belts. They also often had a retro element: both Miuccia Prada and her mother rarely threw out their old dresses.
Time described the clothes as "unassertive, combining traditional good manners and an ultramodern industrial sleekness." Unlike other luxury brands such as Louis Vuitton, the Prada black-and-silver triangle logo was not the dominant design element. The appeal was called "antistatus" or "reverse snobbery." Others would liken Prada to the couture equivalent of the grunge mentality that dominated music and fashion in the early 1990s. Prada was unique among the top fashion houses in embracing a kind of worker esthetic--affluent working women who held demanding jobs identified with it. She would take to calling her women's outfits "uniforms."
Sales were L 70 billion ($31.7 million) in 1990. In 1992, Bertelli gave Partrizio di Marco, who had been working for the firm in Asia, the task of growing the business in the United States. Despite considerable opposition from those who considered the bags too avant-garde, Di Marco succeeded in having them prominently featured in large department stores. Eventually, the elitist yet practical bags became a hit with fashion editors, who assured them their place in fashion history. An important part of the success of Prada's utilitarian products, according to Ginia Bellafante in the New York Times Magazine, was that the very idea of work itself was becoming chic in the high-tech, IPO-driven early 1990s.
Miuccia Prada and husband Patrizio Bertelli (they were married in 1987) guided the firm on a path of cautious growth, making its products rather hard to find. A secondary line called Miu Miu retailed for a bit less than the top line and was aimed at a younger market--or "bad girls," as Miuccia Prada called them. "It's about bad taste--which is part of life today," she said in Time. Much of the Miu Miu line was constructed out of tacky synthetic fabrics.
By the mid-1990s, Prada was well on its way to becoming the decade's preeminent status symbol for those who could afford $400 backpacks, $165 baseball caps, or $1,000 dresses. A line of men's clothing hit the racks in the mid-1990s. Annual sales rose 30 percent in 1994, reaching $210 million. Clothing sales made up about 20 percent of the total and were expected to double in 1995. In 1996, Prada opened an 18,000-square-foot store in Manhattan--its largest. Prada had 47 stores around the world, 20 of them in Japan. The firm owned eight factories and subcontracted work to another 84 manufacturers in Italy. In 1996, Bertelli's and Prada's respective businesses were merged under a new holding company called Prapar B.V., later renamed Prada B.V., and Bertelli officially became CEO of the Prada group.
Miuccia Prada softened her look somewhat in the late 1990s, though her choice of materials--linen with latex, for example--still seemed unique. Bertelli and Miuccia Prada were contemplating how to broaden their company's reach without diminishing the cachet of the brand. They emphasized the lower priced lines, such as Miu Miu and the new Prada Sport collection, introduced in 1997. A new Miu Miu line for men hit the runways in 1999.
Revenues rose 61 percent in 1997 to $674 million, producing a tidy pretax income of $130 million. The company opened a new men's store in Milan during the year. The Wall Street Journal reported that before the opening, Bertelli shattered its windows with a hammer because their arrangements displeased him.
Around the same time, the company was acquiring shares in rival Gucci Group N.V., which Bertelli would accuse of aping his wife's designs. By June 1998 the firm had acquired a 9.5 percent interest at a cost of $260 million. Observers were unsure of Bertelli's intentions; some analysts felt Prada was too small and too debt-laden to consider a takeover attempt. There was speculation that Prada was working in collusion with a third party. At the very least, Prada had a voice as one of Gucci's largest shareholders (a 10 percent holding would be required for the right to request a seat on the board) and would stand to profit tidily should anyone try to take over Gucci. In January 1999, Bertelli sold the shares to LVMH Chairman Bernard Arnault, who was indeed attempting a takeover, for a gross profit of $140 million. (Gucci was able to fend off this advance by selling a 45 percent stake to a white knight, French industrialist François Pinault, for $3 billion.)
1999 Buying Spree
Seeking to build a powerful stable of luxury brands à la Gucci or LVMH, Prada went on a veritable shopping spree in 1999. Bertelli, an avid sailor, and Prada also were spending $50 million to sponsor an entrant in the 2000 America's Cup yacht race.
In March 1999, the firm bought 51 percent of Austrian designer Helmut Lang's New York-based company, which had annual revenues of about $100 million. The deal was potentially worth $40 million. A few months later, Prada paid $105 million to acquire control of Jil Sander A.G., a German fashion house that had sales of about $100 million a year. The purchase was to give Prada a toehold in Germany. Although Jil Sander was to remain in creative control of her namesake company, she resigned as chairwoman a few months later.
In September 1999, Prada announced an agreement to buy 83 percent of Church & Company, a British maker of conservatively styled shoes established in 1873, for $170 million. During the year, a joint venture also was formed with the De Rigo Group to manufacture Prada sunglasses.
An alliance between Prada and LVMH acquired a 51 percent stake in Fendi S.p.A. in October 1999 for a reported $520 million, outbidding rival Gucci. Fendi, which had been owned by the five sisters whose parents had founded the company in 1925, sold trendy $1,500 "Baguette" bags, furs, and sunglasses and was expected to benefit from international distribution in LVMH's global network of shops as well as Prada's production capacity in Italy. Prada paid L 525 billion ($241.5 million) for its 25.5 percent stake in Fendi, which had $321 million in sales in 1998.
The acquisitions propelled Prada to the top ranks of European luxury goods groups. Sales, which exceeded L 2 trillion in 1999, were three times those of 1996. Net income doubled in the year to L 321 billion. The group also had large debt, however.
Prada stepped away from the mergers and acquisitions business in 2000 to digest its purchases, but did sign a loose patronage agreement with maverick designer Azzedine Alaia. A line of skin care products, all packaged in individual foil-wrapped doses, was introduced in the United States in October 2000. The products included creams, face masks, and lip balms. A 30-day supply of cleansing lotion cost $100.
Sales reached L 3.2 million in 2000, a 57 percent rise, while operating profit grew 37 percent to L 600 billion. An initial public offering was planned for July 2001 on the Milan stock market. Prada Holding B.V. planned to float 30 percent of the company to help pay off debts of $830 million and expand distribution. Prada seemed to have succeeded in turning around the troubled Jil Sanders line, though new store openings were consuming the profits. A slowdown in luxury spending, however, particularly in Japan and the United States, prompted Prada to delay the offering.
Aside from the IPO, Prada also had big plans for four new megastores, or "epicenters" of the "Prada universe," to be located in Beverly Hills, New York, San Francisco, and Tokyo. The company hoped to change the shopping experience into one of community involvement, transforming shoppers into "researchers, students, patients, museum goers." Dutch architect Rem Koolhaas and the Swiss team of Jacques Herzog and Pierre de Meuron were commissioned to design the stores.
According to Fortune, Bertelli planned to increase sales to $5 billion by 2010. Under pressure from his bankers, in November 2001 Bertelli sold Prada's 25.5 percent share in Fendi to LVMH, its equal partner in the venture, raising $295 million to help pay down debt.
Principal Subsidiaries: Church & Company (U.K.); De Rigo S.p.A. (5%); Helmut Lang Design LLC (U.S.A.; 51%); I Pellettieri d'Italia S.p.A.; Jil Sander A.G. (Germany; 52%); Sir Robert S.r.l. (77%).
Principal Competitors: Christian Dior S.A.; Giorgio Armani S.p.A.; Gucci Group N.V.; LVMH Moët Hennessy Louis Vuitton S.A.