Prada secures Versace in €1.25 billion luxury power move

[WORLD] Italian fashion firm Prada announced on Thursday that it has signed an agreement with US business Capri Holdings to buy its colorful rival Versace for €1.25 billion (US$1.38 billion). The acquisition will establish a luxury group with over €6 billion in revenue, allowing it to compete more effectively with industry giants such as French conglomerates LVMH and Gucci owner Kering, despite a global decline in the sector.

The move comes as the luxury sector faces increasing pressure from economic uncertainty, particularly in key markets like China and the US. Analysts suggest that consolidation may be the best strategy for mid-sized players to maintain relevance against dominant groups like LVMH, which reported €86 billion in revenue last year. Prada’s acquisition of Versace could signal the beginning of a broader realignment in the industry.

"We are delighted to welcome Versace to the Prada Group and to begin a new chapter for a brand with whom we share a strong commitment to creativity, craftsmanship, and heritage," Prada chairman and executive director Patrizio Bertelli said in a statement. In 2018, Capri paid €1.83 billion (then US$2.1 billion) for Versace, which was previously owned 80% by the Versace family and 20% by US investment firm BlackRock.

Industry insiders note that Versace’s valuation decline reflects both broader market challenges and internal struggles to modernize the brand. While its bold prints and celebrity endorsements once defined 1990s glamour, younger consumers have increasingly gravitated toward understated luxury or streetwear-inspired designs, leaving Versace searching for a new identity.

Due to dwindling revenues, the Milan-based label put Versace up for sale and initiated exclusive negotiations with Prada at the end of February. Capri, which also owns Jimmy Choo and Michael Kors, had to accept a lower price from Prada due to the market uncertainty induced by US President Donald Trump's tariffs According to the Financial Times, the price was previously projected to be around US$1.6 billion but has been negotiated down in recent days.

The tariff tensions between the US and Europe have particularly impacted luxury conglomerates with transatlantic operations. Capri’s decision to offload Versace may also reflect a strategic pivot toward its more accessible brands, Michael Kors and Jimmy Choo, which have shown resilience in mid-tier markets.

Last month, Donatella Versace stepped down as creative director after more than 30 years, a move widely interpreted as a precursor to the agreement. She took over the label in 1997, following the murder of her older brother Gianni, who started it in 1978. However, on April 1, she was replaced as creative director by Dario Vitale, who has managed booming sales at Miu Miu, Prada's sibling brand aimed at a younger audience.

Vitale’s appointment suggests Prada intends to inject fresh energy into Versace while leveraging his success in appealing to Gen Z and millennial shoppers. His background in blending contemporary aesthetics with commercial viability could prove crucial in reviving Versace’s fortunes.

Donatella Versace, who turns 70 in May, is now the brand's chief ambassador. While Versace remains a label associated with the jet set, some of its luster has faded in recent years. Its sales in the third quarter of fiscal 2025 was US$193 million, a 15% decrease. In contrast, Prada, under the creative direction of Miuccia Prada, the 76-year-old granddaughter of group founder Mario, is in good condition.

Despite a global slowdown in luxury goods sales, Prada's net profit rose 25% to €839 million in 2024, while revenues increased 15% to €5.4 billion. On Thursday, Andrea Guerra, Prada's group CEO, stated that Versace had "huge potential" but stressed that there was still work to be done.

"The path will be long, requiring discipline and patience. The evolution of a brand always requires time and consistent focus," he stated. The acquisition, which will be backed by €1.5 billion in new debt, is anticipated to close in the second half of 2025. The two fashion labels have dramatically different styles, with Versace's exuberance juxtaposed against Prada's elegant minimalism.

Market observers will be watching closely to see how Prada balances Versace’s flamboyant identity with its own restrained elegance. Some speculate that Prada may adopt a hands-off approach to creative direction while streamlining supply chains and expanding Versace’s digital presence—a strategy that has worked well for other acquired brands under larger umbrellas.

Prada stated that its latest acquisition "constitutes a strongly complementary addition" to its portfolio. Versace would "maintain its creative DNA and cultural authenticity," the company stated, while benefiting from Prada's "industrial capabilities, retail execution, and operational expertise." The transaction deviates from a recent pattern in which prominent Italian fashion brands such as Gucci, Fendi, and Bottega Veneta have been taken up by French competitors.

"Prada will be able to breathe new life into a dying brand," Antonio Bandini Conti, a design expert, told AFP. However, a prior attempt to broaden the Prada portfolio, which includes premium footwear labels Car Shoe and Church's, provides a cautionary tale.

The family group purchased the German brand Jil Sander and the Austrian label Helmut Lang in 1999, but sold them in 2006 because they were negatively impacting its financial performance. Prada and LVMH purchased a 51% ownership in the Roman label Fendi in 2000, but Prada sold its 25.5% investment to the French luxury powerhouse the following year.

The failed acquisitions of the early 2000s serve as a reminder of the risks of overextension. However, Prada’s current leadership, including CEO Andrea Guerra—a veteran of LVMH—brings deeper experience in integration, which could improve the odds of success this time around.

With the Versace acquisition, “I see a risk for Prada to become distracted from its core business,” Luca Solca, an analyst at Bernstein, told AFP.