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Prada Adds to Sander Coffers As House Posts $28.3M Loss

MILAN — Cash-strapped Jil Sander is getting a bigger allowance.<br><br>As Jil Sander reported higher losses and marginally lower sales in 2002, its parent company Prada confirmed that it has to inject fresh cash into the money-losing German...

MILAN — Cash-strapped Jil Sander is getting a bigger allowance.

As Jil Sander reported higher losses and marginally lower sales in 2002, its parent company Prada confirmed that it has to inject fresh cash into the money-losing German label, which reported higher losses and marginally lower sales for 2002. The amount of the transaction has not been specified but it would mark the second capital increase Prada has funded since it bought the brand in 1999.

Prada gave Jil Sander a $21.5 million shot in the arm back in 2001. Dollar figures have been converted from the euro at current exchange.

“What this demonstrates is the unconditional support that the majority shareholder has for Jil Sander until the company’s turnaround is completed,” said a Prada spokesman.

However, Prada declined to comment on the latest wave of speculation that founder Jil Sander is negotiating a return to the company she sold to Prada in 1999. She quit as chairwoman and chief designer in January 2000, just five months after the sale.

Jil Sander more than doubled its consolidated net loss for the year ended Dec. 31 to $28.3 million from $11.5 million in 2001, as the company recorded higher fixed costs related to the opening of flagships in London and New York.

Sales in 2002 fell to 0.7 percent to $149.2 million from $150.3 million the year before. However, excluding the effect of currency fluctuation, which penalized companies doing business in euros last year, sales would have risen 2.1 percent.

Bernhard Wirmer, chief financial officer of Jil Sander, told a German newspaper, “I expect that Prada will give an injection to our reserves this year to improve our equity capital situation.”

He added that another loss is expected during the current year.

Prada has been coming under increasing pressure itself. With plans for an initial public offering on hold, it is trying to chip away at its debt pile of some $827.6 million. The company has said it might sell off some real estate to generate cash.

In an effort to reduce debt, could Jil Sander be on the block as well? A Prada spokesman said that idea is “completely unfounded.”

Recent press speculation has characterized Hugo Boss as being interested in snapping up the brand. Marzotto, the Italian group that controls Hugo Boss, said Boss is not seeking acquisitions at the moment and is instead focusing on making its nascent women’s business profitable.

“We are not making any acquisitions in 2003,” said a Marzotto spokesman. “Later on we’ll see.”

Andrea Paladini, an analyst with Centrosim in Milan said a Jil Sander acquisition could be a logical step for Hugo Boss as the German company aims to diversify into the women’s market. Speculation about such a purchase could be fueling the reports of a Sander return to the firm as well.

“Jil Sander didn’t get along with [Prada chief Patrizio Bertelli],” he said. “The hypothesis is that if someone buys the company, she could come back.”