Two of the glitziest names in luxury are going under one roof.
What happened: Legendary fashion house Prada is buying the also-legendary brand Versace from luxury group Capri Holdings for nearly US$1.4 billion. While Prada is known for its minimalism, Versace is famous for its boldness, so Prada thinks the acquisition will lure new customers.
- Versace has been struggling as of late, seeing revenues fall 15% over its quarter ending Dec. 28; Capri is selling the brand at a loss, having paid $2.15 billion for it in 2018.
- Meanwhile, Prada sales have stayed strong, with net revenue up 17% last year. Much of that was driven by its uber-trendy Miu Miu label, which had record sales.
Why it matters: The deal is a potential sign of a spree of consolidations in the luxury sector as rivals look to link up to better handle tough times. After a post-pandemic windfall, luxury sales are now declining, and the forecast has only gotten worse since the tariff war began.
- With many analysts now projecting a global economic downturn, luxury demand is expected to be an early casualty of decreased consumer spending.
- Tariffs will also have a negative impact on globalization — a key to the sector’s growth — as the cache of products made in Europe suddenly becomes a roadblock.
Yes, but: Big deals could face competition challenges. In fact, Capri only sold off Versace because a merger with luxury group Tapestry was blocked by the U.S. Federal Trade Commission.—QH