Prada's Potential IPO: When It Pays to Be Fashionably Late
Is the fourth time ever a charm? It could be for Prada's IPO. Miucca Prada and her husband and CEO Patrizio Bertelli own 95 percent of the Italian fashion house that has pulled the plug on initial public offerings three times over the last decade. Now the company plans to list its shares on the Hong Kong market, a first for an Italian label. The time -- and place â€"- may finally be right.
It's no doubt been a tough decision for the C-suite. Prada's enjoyed a long history as a tightly-held family business since its founding in 1913. Avant-garde designer Miuccia took over the company from her mother in 1978, but it would be more than a decade before her decidedly unsexy designs would become the drool-worthy, must-haves we know today. Indeed, even as the company expanded beyond iconic backpacks to complete men's and women's ready-to-wear collections, as well as Miu Miu, a lower-priced line, Miuccia has parlayed her fashionably frumpy aesthetic to great effect.
Stumbles on the IPO runway
But despite its domination of the fashion business, Prada's balance sheets haven't always been so spiffy. An expensive shopping spree in the late 1990s saw the acquisition of the Helmut Lang and Jil Sander brands. While the German designers' minimalist approach to apparel aligned with Prada's, the companies wore down profits. To beef up the books, Prada got ready to list on the Milan exchange in 2001 and again in 2002. Both times, market conditions faltered and Prada withdrew, eventually selling off the unprofitable brands in order to re-structure debt.
Another attempt came in 2007 even though things were picking up. Prada's earnings rose 66 percent to $202.6 million, on $2.64 billion in sales, thanks to constant demand for its leather goods and accessories. It dragged through 2008, at which point the recession put the kibosh on purchases of Prada's high-ticket handbags, while market volatility did likewise for the IPO.
Though IPOs stalled out everywhere between 2008-10, things are starting to jump. And Hong Kong seems to be the market of choice to make things happen. Indeed, France's L'Occitane was the first European company to make the leap in the Asian market, which played host to a record $49 billion raised in IPOs last year.
Tempting the rising Chinese middle class
Prada's no different from L'Occitane and others sniffing around the HK market. Everyone wants to clothe the rising middle class in China and other emerging Asian markets. So why not seek the home-field advantage to help fund opening stores?
On the practical side, Prada needs the money. As owner of its eponymous brand as well as Miu Miu, Church's and Car Shoe, it's carrying a debt load of around $1.3 billion. The good news is that Prada's expecting record sales of $2.75 billion this year, mainly in Asia. Though there's no word yet on how much they'll try to raise, perhaps Miuccia and her husband feel like they'll still be able to maintain a comfortable measure of control if they snag investors in a market already in thrall to their goods.
Image via Wikimedia Commons CC 2.0
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