Prada: The IPO Dilemma

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Case Details:

Case Code : BSTA014
Case Length : 14 Pages
Period : 1995 - 2005
Pub Date : 2005
Teaching Note :Not Available
Organization : Prada Group
Industry : Luxury Goods
Countries : Global

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Background Note

Prada was established in Milan, Italy in 1913, when Mario Prada (Mario) started selling shoes, leather handbags and trunks under the Prada label in his Milan boutique. Mario's classic Prada suitcases, made of heavy walrus skin, became immensely popular...

Business Model

Miuccia and Bertelli had attempted to build a new image for Prada that capitalized on Muiccia's bohemian yet refined style. They made sure that Prada's product line strongly reflected the group ethos. Miuccia's designs revolved around innovation and tradition. Classic Prada clothes were marked by spare designs in high-tech fabrics with small details, such as tiny buckles or leather buttonholes, noticeable mainly to people clued in to the Prada sensibility...

Financials

In 1997, Prada recorded sales of $770 million, up 66% from 1996. Though sales were growing at a record pace, so were Prada's overheads. As expensive new stores came up, Prada's overheads increased from 38% of sales in 1997 to 43% in 1998. In 1998, Prada recorded a net profit of $77 million on sales of $ 798 million...

Looking Ahead

As 2005 dawned, Bertelli had a lot on his mind. Going public had become a sore topic with him. But even as Bertelli veered away conversations from the “hot topic”, Prada's finances remained a major concern. In June 2005, a $ 910 million convertible bond (Deutche Bank) would mature...

Exhibits

Exhibit 1: The Prada Designs
Exhibit 2: Global luxury brands
Exhibit 3: Prada's Buying Spree
Exhibit 4: Sales$bil Five Year Growth

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