Fashion Forward

Prada runway show, Beijing, January 2011

Prada runway show, Beijing, January 2011

Late last week Prada announced plans to go public. Rumors had been swirling about an IPO for most of 2010--actually, for most of the past decade. The new twist to the tales told last year was that the Company had decided to list on the Hong Kong stock exchange. And that is, in fact, what it plans to do. This move is either brilliant--or sheer, high-stakes lunacy.

Prada has always been more modern, more futuristic and more willing to take risks--aesthetically, strategically and financially--than other luxury companies. There have been some ill-considered acquisitions and the burden, at times, of an overly leveraged balance sheet. On the whole, however, Miuccia Prada and her CEO husband, Patrizio Bertelli, have done a masterful job of staying relevant and at the forefront of luxury and fashion, while growing Prada from $450,000 in sales, when they took over the company from her family in 1978, to well over $2 billion in annual revenues today.

Now, at a time when other luxury companies are, en masse, embracing the idea of heritage as a means of validating their essence, Prada is moving firmly into the future by attempting to craft an identity that matches its global footprint: borderless, drawing on and yet unattached to its Italian and even its European roots. Electing to list in Hong Kong is the latest--and most powerful--step in this delicate dance.

The first explicit step was made last September, when Miuccia introduced the Company's Made In Collection. In the face of stricter rules being put in place to ensure the quality of the "Made in Italy" label, Prada announced that certain items sourced and created hand-in-hand with artisans in places such as Peru, India and Scotland would be labeled "Prada, Milano, Made in ____." With this collection Prada was exposing and embracing the global nature of its business in an entirely new way, placing a confident vote that consumers value its product for the Prada name and workmanship, not for "Italy" filling in the blank.

Then in January, in rapid succession, came an announcement that the Company would open its first ever offices outside of Milan--design and research outposts in Paris and Hong Kong, followed by its first ever runway show outside of Europe--in Beijing, followed by the listing notice.

There are solid, near-term, practical market reasons for Prada to list in Hong Kong--including an extremely favorable valuation environment and more manageable reporting requirements. Nonetheless, had I been advising the Company on a public offering, I likely would have counseled that Prada go public in Europe, in Paris (not in Italy, where others have suggested). I would have based this strategy on three factors: listing in Europe reinforces Prada's European identity; the Company's peers, Hermès, LVMH and PPR, are traded in Paris (and Paris' exchange is larger than Milan's); Asia can come later.

Taken in tandem with other business moves made over the last six months, however, it is clear that there are more than market forces influencing the selection of Hong Kong as a listing domicile. And my advice would have been out of step with Prada's vision of its future: the Company is not concerned with reinforcing its European identity, following its peers or waiting to embrace Asia. Prada is committing to a vision of luxury in the 21st century that draws from and lives in the world at large.

I have long admired Miuccia Prada. I love her serious, intellectual take on fashion, combined with her strong sense of play and mischief. As it lists in Hong Kong the Company is doing in the market what Miuccia has long done on the runway: challenging a sense of what's possible and embracing change, moving forward into the future. If Prada succeeds at transitioning from an Italian to a borderless luxury brand, the potential implications for the broader luxury industry are profound.

Miuccia Prada rarely grants interviews. A recent conversation with WWD is here (subscription required). And a summary of a 2004 New Yorker profile of her, her husband and the Company is here (subscription required for the full article).

Photo: Jonah Kessel, WWD