By  on May 5, 2005

MILAN — Prada Holding NV said Wednesday that its Jil Sander unit stayed in the red in 2004, even as it saw double-digit sales growth.

The news came as Prada confirmed widespread speculation it is pondering the sale of another of its labels that has seen the departure of its namesake designer, Helmut Lang. WWD reported on March 25 that three potential buyers were said to be looking at the Lang business, but Prada declined to comment at that time.

Jil Sander is shifting its fiscal year to end on Jan. 31 to coincide with that of Prada Holding, creating a onetime 13-month reporting period. For the 13 months ended Jan. 31, Jil Sander’s net loss widened to 29.6 million euros, or $37 million, and sales totaled 153.1 million euros, or $191.4 million.

All dollar figures have been converted from the euro at average exchange rates for the period to which they refer.

Jil Sander said sales for the 12-month period ending Dec. 31 rose 10 percent to 137.5 million euros, or $170.5 million, from 124.9 million euros, or $141.1 million, in 2003 on “noteworthy” retail growth in Germany and elsewhere in Europe.

Prada did not provide a net loss figure for the 12-month period to directly compare with Jil Sander’s 2003 net loss of 28.4 million euros, or $32.1 million.

In January of this year, Jil Sander chief executive officer Gian Giacomo Ferraris estimated that 2004 sales on a 12-month basis would jump 13.8 percent after losing nearly 10 percent in 2003. He said sales growth likely would slow to a single-digit increase for 2005. The company has said it wants to generate a profit at the operating EBITDA level, which includes some one-time items, in fiscal 2006.

Jil Sander blamed the 2004 losses on a combination of an adverse exchange rate environment, store operating expenses and product development costs. In a statement, the company said it expects to reduce losses in 2005 by implementing cost-control measures and an “aggressive restructuring plan” targeting production, logistics and retail.

“Last year was certainly a difficult year from the group; however, we are taking the necessary steps in terms of organizational restructuring and cost control to bring Jil Sander back to profitability,” Ferraris said in a statement. “Our goal is to continue to grow the top line through our core ready-to-wear business, but also through increased licensing revenues, widening our accessories range and selectively expanding our distribution network.”Ferraris said Jil Sander’s return to the namesake label helped boost sales in 2004. As reported, Sander made peace with Prada and returned to her post as creative director in May 2003, only to depart again in November of last year.

In February, a design team and Sander’s longtime stylist, Joe McKenna, presented the first Jil Sander collection to bow since the designer’s departure. The fall 2005 collection won rave reviews for sticking to Sander’s clean, minimalist aesthetic and churning out high-belted coats and bubble skirts in black and neutral hues. WWD wrote: “Whatever their current relationship may be with Sander herself, McKenna and the rest of the team captured her essence with almost eerie clarity.” (McKenna is a consultant for WWD’s sister publication, W.)

Meanwhile, a Prada spokesman acknowledged the company is in talks to sell the Helmut Lang brand, but Prada failed to identify any potential buyers.

Press reports have named Diesel and Tommy Hilfiger as contenders, but sources close to both companies have denied their interest in buying the Lang brand. A Tommy Hilfiger spokesman declined to comment and a Diesel spokeswoman issued the following statement: “We are always aware of what is going on in the market, but right now, we are very busy with the management and growth of what we already have.”

Similarly, sources at several private equity companies said they haven’t heard from Prada or its bankers regarding Lang. They downplayed any potential interest in the brand, noting financial losses and a complex situation resulting from the namesake designer’s departure earlier this year. Many are speculating that a buyer might forge an agreement with Lang to return.

One source estimated Prada chief Patrizio Bertelli is asking about 100 million euros, or $128.92 million, for Lang.  Unlike Jil Sander AG, which is still publicly traded thanks to a small float, Lang is 100 percent Prada-controlled and there are few numbers available for valuations. The most recent figures show Lang’s 2003 sales declining 33.1 percent to 27.9 million euros, or $31.5 million, from 41.6 million euros, or $39.5 million, in 2002.

In March, Prada said it was closing Helmut Lang’s New York office just two months after the designer left the company. There’s talk that recently appointed designers have been let go and speculation that stores will be closed. The Prada spokesman said he was not aware of any store closings and declined to comment on whether design jobs had been cut. Lang himself has set up an office in New York’s SoHo called HL-art to evaluate future projects.

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