Byline: Sarah Raper / Luisa Zargani

AMSTERDAM — Prada chief Patrizio Bertelli invited 10 international journalists to the headquarters of Prada’s holding company here Wednesday for a first-ever briefing on the group’s figures, a discussion of some of its strategies and to share a secret: He’s looking into going public.
The acknowledgement reverses previous denials by Bertelli that an IPO could be in Prada’s future.
“We might think about the stock exchange,” Bertelli said, smiling, confirming reports in these columns last March. “Our philosophy is that it doesn’t make sense for small companies, but it might make sense for a bigger company that is growing quickly. The Prada Group has the right dimension to be listed. While we’ve excluded it in the past, now the size might justify such a strategy, but only after 2002 or 2003.”
Bertelli has a maddening habit of keeping outsiders guessing about his moves, so Wednesday’s press briefing, a working session around a conference table in the Prada Holding BV offices, was new territory and probably a warm-up for the p.r. regimen an IPO would require. The Prada chief, just back from a weeklong family vacation in Egypt, said he would like to schedule two financial briefings a year.
“We want to communicate with the press in a direct fashion. The communication through financial data is very important.”
The meeting was also a sort of coming out for some of the top suits at Prada. Bertelli was flanked by Roberto Massardi, corporate finance and investment planning manager; board member Marco Salomoni; group chief financial officer Riccardo Stilli, and Giacomo Santucci, director for new business development and group marketing and sales. And once Bertelli opened up, he did not disappoint. He discussed issues ranging from Prada Skin Care, the new beauty line launching in stores in September, to his falling out with Jil Sander and collaboration with architects Rem Koolhaus (for new Prada Sport unit opening in New York’s SoHo district and Prada stores in San Francisco and Los Angeles) and Jacques Herzog and Pierre de Meuron (for a new building in Tokyo).
Last year was one of the busiest ever for Prada as Bertelli led an acquisitions drive that saw the company snap up 51 percent of Helmut Lang, gain control of Jil Sander, launch a takeover of the publicly quoted Church’s and establish a joint venture with LVMH Moet Hennessy Louis Vuitton in October to take a 51 percent stake in Fendi — all in the last five months of the year.
Critics warn that Bertelli gobbled too much too fast, but the Prada chief adamantly defended his strategy, saying the group had been on the prowl and courting brands with similar aesthetic and philosophical cultures as far back as 1996.
“This was not a hysterical purchase frenzy,” he bellowed. “There is always a risk of a brand overheating, of oversaturating the market. So our strategy is to look around for labels that are similar to ours. Our acquisitions are backed by a carefully laid strategy to grow the size of our company.”
He was quick to add, however, that he was swearing off new acquisitions, at least temporarily.
“Now we have to take stock. We will not go through with more acquisitions, not because we don”t have the financial means, but because we want to organize what we have. I see the years 2000 and 2001 as crucial and fundamental for consolidating our business.”
Bertelli also stressed that while his new labels were all under the Prada Group umbrella, it was important for all the companies to have a vertical structure.
“I don’t want them to be satellites of Prada” he said. “There must be a transfer of know-how, but they must remain autonomous.”
Asked whether it was risky to drop out of the takeover game when there were new competitors, including Gucci, he said, “I don’t think we ever need to worry about a shortage of things to buy.”
But he added that Prada planned to continue to acquire like-minded companies, rather than seeking wider diversification.
Last year, Prada Group earned net profits of $163 million (converted from lire at current exchange rates) on sales of $1 billion. Those figures include four months of Jil Sander and two months of Church’s and do not include $10.5 million in royalties. Earnings last year rose 130 percent after dipping in 1998 by 13 percent because of investments. Sales were up 52 percent over 1998.
In 2000, the first picture of the full group will emerge and Prada is projecting sales of more than $1.5 billion. Prada and Miu Miu will account for about $1.1 billion. Of that, Miu Miu does $125 million. Jil Sander and Church’s will each kick in $135 million and Helmut Lang will do $25 million. The projections are based on the first quarter, when combined sales at Prada and Miu Miu were up 59 percent.
Bertelli acknowledged that Jil Sander was the rockiest spot in the new empire and said he viewed the designer’s definitive departure in February after months of infighting as “positive.”
“We didn’t want her to go,” Bertelli said. “She had bad advisers. She willingly sold her company, and of her own accord decided we were the most attractive buyers. Our agreement was that she would continue to participate in design, but that we would oversee management, and that involves pricing and product mix. She could only function when she was in charge, and it was as if her decision-making rhythm had been interrupted and raped.”
However, he said Sander had made the best decision for herself. “She was in such pain. We would have been happier if she had stayed on.”
He said a team of designers trained by Sander would replace her in the studio.
“Creativity is important, but it does not mean there is one person with a first and last name,” said Bertelli, but pointed out that his wife, Miuccia Prada, would not be involved with the Sander line.
Late last month, Bertelli pulled Sander off the Frankfurt stock exchange. That move was said to be a prelude to an IPO for Prada Group. Observers said taking Sander private might make it easier to list the group as a whole.
The most important product development at Prada this year will be a skin care line that will be launched worldwide in September and August in Prada stores. Distribution through traditional beauty vendors and an Internet distribution component are planned for 2001. The line was developed in collaboration with two established skin care specialists, a Japanese company and a Swiss firm. Prada executives declined to provide the names.
It is unusual for a big international brand to start with skin care, which is more technical and requires more advice than fragrance, but Santucci said it was all part of Prada’s plan to turn the routine break into the beauty business inside out.
“Creams are modern,” Bertelli chimed in. “Perfumes are not modern. They were designed to cover up foul body odors. Now people take baths and they worry about their skin.”
Santucci said Prada spent three years developing a beauty strategy, including many months in negotiations with Estee Lauder about a partnership. In the end, Lauder was unwilling to give Prada as much creative control as it sought, he said, and was unable to radically alter its production and distribution systems to accommodate Prada’s approach.
Executives declined to release projections for the line or to discuss spending.
Bertelli also seems to be something of a renegade when it comes to the Internet. He certainly hasn’t caught the bug like his newest partner, LVMH chairman Bernard Arnault. A Prada site is in the works and Bertelli mentioned testing sales with beauty and perhaps eyewear, but he offered few concrete plans.
“It’s a waste of time to think about e-commerce when we have so much to do with all our labels,” he said, adding that he was skeptical about selling luxury goods online.
Other developments at Prada include:
Bertelli said he was thrilled by the strong results of the new partnership between Prada and eyewear manufacturer De Rigo. Wholesale volume in the first eight months was $50 million and Bertelli said De Rigo would begin distributing Helmut Lang, Jil Sander, Miu Miu and Fendi next year.
Bertelli confirmed that gains from Prada’s sale of its Gucci stake to Bernard Arnault last year totaled $95 million.
At Fendi, there have been reports of sparring between Bertelli and LVMH executives, but the Prada chief said they were unfounded. “It’s great. We respect each other. We’re certainly not at war.” Volume for 1999 at Fendi was $175 million, including licensing royalties. This year, sales are projected at $275 million to $300 million and in 2001, once the company has brought nearly all licensed business back in house, volume will be between $425 million and $500 million, Bertelli said.
At Church’s, he said he planned to dust off the McAfee brand, which he described as a custom product similar to John Lobb.
He said Helmut Lang was being positioned as a sophisticated but younger fashion brand, priced 25 percent below Prada. Prices have been trimmed already and will be dropped again to achieve that target.
Bertelli said watches would be one upcoming project and would be launched at least in time for the September 2002 America’s Cup trials.
Prada will again sponsor a boat for the 2002-2003 edition of the America’s Cup, although Bertelli said it would cost less the second time around, probably about $40 million.