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MILAN — The booming luxury goods market and what appears to be a renewed consumer appetite for fashion have sparked a rush to the stock market for Italian brands, led by Prada SpA.
After postponing its initial public offering several times over the last decade, Prada will be the first of a string of Italian companies to list on the stock exchange, with Moncler SpA and Salvatore Ferragamo SpA to follow shortly afterward. Looking ahead, Brunello Cucinelli recently said he was also tempted by the stock market for his namesake firm, although the timing is still uncertain, and jeweler Pomellato plans to launch an IPO by 2013.
Drawing a comparison with the sailing world, Armando Branchini, deputy chairman of Milan consultancy InterCorporate, said that given the economy today, companies can now “gather wind” and an IPO can provide them with new resources to invest and further benefit from the market’s growth.
“The second semester of 2010 was very positive, surpassing the record year that was 2007,” said Branchini, adding that growth of between 10 and 11 percent is expected in the luxury goods sector in 2011, barring major wars or natural disasters. “We have at least three or four years of steady growth. Actually, I am optimistic and I think even the whole decade will be very positive, gauging the gains in both traditional and new markets.”
On Friday, Prada received the green light for its listing on the Hong Kong Stock Exchange, according to sources, and its long-awaited IPO is expected to take place June 23 or 24. The road show will kick off June 6 in Singapore, followed by Hong Kong, London and Milan, and will end in New York on June 17. Chief executive officer Patrizio Bertelli is expected to travel for the presentations.
Prada’s goal is to list a 20 percent stake. Banca IMI-Intesa Sanpaolo Group, which owns 5.1 percent of Prada, is expected to sell its shares, while the rest will be sold by designer Miuccia Prada and Bertelli, who control the majority 95 percent stake through Amsterdam-based Prada Holding B.V.
Analysts believe the IPO could value the company at up to $9.5 billion.
Prada, which declined comment on the IPO, put a stock market flotation on hold repeatedly over the last decade, citing negative economic conditions. Now, however, it appears the timing couldn’t be better. A Milan-based analyst said “this is the right moment” to list because of the strength of the stock markets and because luxury goods sales have picked up. “Burberry is the benchmark; it’s flying and has great multiples,” said the analyst, who requested anonymity.
While all are posting strong financial results, Prada, Moncler and Ferragamo each have different reasons to list. “Prada wants to rebalance its financial situation, and Ferragamo has a generational issue, with several heirs to sort out,” said the analyst, referring to the debts of the former, which stood at 408.6 million euros, or $547.5 million, at the end of the fiscal year ended Jan. 31. “Moncler is controlled by an investment fund and one of funds’ favorite ways to exit a company is an IPO, although they may even consider a dual track and a secondary buyout at the last moment,” the analyst said.
Private equity fund Carlyle Group owns 48 percent of Moncler.
“The gates were closed, they were all lined up and now that the conditions are good, they are set to go,” said Mercury Advisers co-founder and luxury goods consultant Tomaso Galli about Prada, Ferragamo and Moncler.
“They all had strong results for all of 2010, they are believable and they can present strong first quarter results and projects for future development that are reasonably attainable,” said Galli, who previously worked at Prada during its past attempts at an IPO.
The latest string of IPOs comes after a dearth of listings here. Italian e-tailer Yoox was the first company to enter the market after Moschino and Alberta Ferretti parent company Aeffe and jewelry firm Damiani did so in 2007. Federico Marchetti, chairman and founder of Yoox, listed the company on the Milan Stock Exchange in December 2009, and continues to believe it was the right move. “The bourse is a great solution, we tripled our share price in 18 months,” he said. “It’s a great experience for the company, and you attract managers and new talents.”
As for these IPOs being so close to one another, Marchetti views this as a positive. “Just as with cars tailgating, they each gather steam from the one in front,” he said.
One Milan-based analyst downplayed Prada’s debt issue, saying he doesn’t believe the company turned to the stock exchange for this reason. “The bourse must be seen as a tool to finance expansion, and it would only be a problem if you list to pay your debts. Investors want to see a return in the future, and they can expect share values to grow only if a company is expanding and more profitable, and Prada is,” he said.
Prada had record profits and sales in 2010. In the year ended January 31, the company reported a 150.4 percent surge in net profits to 250.8 million euros, or $331 million at average exchange. Revenues totaled 2.05 billion euros, or $2.71 billion, up 31.1 percent compared with the year before.
The luxury group also is looking to tap into China’s fast-growing taste for luxury by listing in Hong Kong rather than in Europe. While Samsonite declined to comment, sources say the U.S. luggage maker is also looking at a listing in Hong Kong by mid-June.
Others remain focused on Italy, however. In April, Moncler SpA filed documents to list on the Italian Stock Exchange, heading for a float by June. Moncler’s filing did not disclose the amount of shares it plans to list, although sources have said it was looking at floating up to 50 percent of the company. They estimated the float would value the group at about 1.1 billion euros, or $1.5 billion at current exchange.
Remo Ruffini, the firm’s president and creative director, who acquired Moncler in 2003, views the IPO as a chance for the company to invest in further international expansion, both via wholesale and, increasingly, its own retail stores.
Salvatore Ferragamo SpA also filed documents last month to list on the Italian Stock Exchange. Sources say Ferragamo’s IPO could value the company at around 1.5 billion euros, or $2.1 billion at current exchange, and that the firm could list up to 30 to 40 percent of its shares.
Ferragamo first talked about going public in 2006, when it appointed Michele Norsa as ceo, but decided to shelve the project due to worsening market conditions. Now the company appears eager to capitalize on its strong performance last year, when it returned to the black, posting sales that hit the $1 billion mark.