Prada Buys Versace For €1.25B: Outlet Dependency and Premium Brand Turnaround Strategy .
Prada Paid €580 Million Less Than Capri Did For Versace
Prada Group completed its €1.25 billion acquisition of Versace on December 2, 2024, taking control of one of Italy's most recognizable luxury brands at a 32% discount to what Capri Holdings paid in 2018. Versace posted an operating loss in its most recent fiscal year, with current annual revenue below the fiscal year ending March 2020—the first full year under Capri ownership, according to Business of Fashion reporting on the transaction closing.
The acquisition hands Lorenzo Bertelli, scion of the Prada-Bertelli family, the executive chairman role at Versace. Andrea Guerra, Prada's chief executive, publicly stated that investors should expect a long turnaround requiring disciplined execution and patience. HSBC analyst Erwan Rambourg warned that "the next 12 months will be rough," citing the need to reestablish Versace's premium positioning by reducing outlet mall dependency—a move that will initially hurt both sales and margins.
The deal tests whether Prada can succeed where Capri failed, and whether the Prada-Bertelli family's 80% ownership stake provides enough runway to execute a multi-year brand rehabilitation.
Versace Lost a Quarter of its Revenue Under Capri Ownership
Versace's revenue dropped 25% over the past two years, a decline that extends beyond the sector-wide luxury downturn driven by macroeconomic headwinds and weakened value propositions from price increases without corresponding product innovation. While competitors like Hermès, Brunello Cucinelli, and Moncler maintained profitability during the luxury market contraction, Versace posted operating losses.
The brand's struggles under Capri Holdings began before the recent downturn. Capri acquired Versace in September 2018 for €1.83 billion, but the conglomerate's operational approach—emphasizing outlet distribution and promotional activity—steadily eroded brand equity. By the time Prada announced its acquisition in August 2024, Versace had become financially distressed despite maintaining top-five global brand awareness, according to Lorenzo Bertelli's public comments.
Bernstein analyst Luca Solca noted that luxury brand revivals have produced "haphazard success" across the industry. He pointed to Prada's own acquisition history: Jill Sander and Helmut Lang were both sold at a loss after failed turnaround attempts in the early 2000s, while Church's "is today flirting with utter irrelevance" within the Prada portfolio. Solca called Prada's acquisitions record "abysmal," establishing a skeptical baseline for the Versace integration.
Outlet Distribution Destroys Premium Brand Architecture
HSBC's Rambourg identified outlet dependency as Versace's core structural problem, stating that Prada "should reestablish Versace as a premium brand, rather than one dependent on outlet malls, which was always the risk of being run by Capri." This dependency creates a vicious cycle: heavy outlet presence trains consumers to wait for discounts, which necessitates more outlet inventory to clear unsold full-price goods, which further conditions customers to avoid paying full retail.
Reducing outlet distribution requires accepting near-term revenue and margin pain. Brands must shrink production volumes, tighten inventory management, and risk alienating outlet-dependent customers who may not return when the brand repositions at full price. Burberry's attempted outlet reduction under former CEO Marco Gobbetti between 2017-2021 demonstrated these challenges: the strategy improved brand perception among luxury consumers but temporarily depressed financial performance, contributing to Gobbetti's departure before the turnaround fully materialized.
Guerra committed to preserving Versace's "DNA" while leveraging Prada's supply chain efficiency, retail network, and global distribution platform. However, he acknowledged the risks, stating, "The only thing I don't want to happen is I don't want to kill the patient while we cure it." The Prada-Bertelli family's 80% ownership gives management latitude to absorb short-term financial underperformance, but investors and industry observers will measure progress against clear milestones: outlet mix reduction, full-price sell-through improvement, and operating margin recovery.
Creative Director Dario Vitale Delivered Runway Credibility
Dario Vitale's Spring/Summer 2026 debut collection for Versace during Milan Fashion Week exceeded industry expectations, marking the first show in the brand's 47-year history not designed by founder Gianni Versace or his sister Donatella. Vitale joined Versace as creative director earlier in 2024 after 15 years at Prada sister brand Miu Miu, where he served as design and image director.
Business of Fashion's coverage noted that Vitale "resurfaced long-lost depth and eroticism at the iconic Italian brand," addressing the creative staleness that had developed under Donatella's later years as creative director. However, runway enthusiasm does not guarantee commercial success—translating critical acclaim into higher full-price sales requires 12-18 months as new designs flow through production, distribution, and retail.
Donatella Versace transitioned to a brand ambassador role when Vitale assumed creative leadership, but her absence from his Milan debut raised questions about her commitment to the new structure. Neither Donatella nor senior Prada executives attended the show. Versace declined to comment on her future role or make her available for interviews, and Prada also declined comment. Guerra indicated at BoF's VOICES conference in November 2024 that Prada management would evaluate Versace's organizational structure before making significant personnel decisions, emphasizing stability during the initial integration period.
Prada's Acquisition Track Record Undermines Confidence
Elsa Berry, co-founder and managing director of Vendôme Global Partners, a New York-based M&A advisory firm, stated that "reviving Versace won't be easy because it has been going downhill for more than 20 years and deals in the luxury sector are always difficult." Her assessment aligns with Bernstein's Solca, who documented Prada's failed attempts to build a multi-brand luxury group in the early 2000s.
Prada acquired Jil Sander in 1999 and Helmut Lang in 2000, both at significant premiums, with the goal of creating an Italian alternative to LVMH and Richemont. Both brands were sold at losses—Jil Sander to private equity firm Onward Holdings in 2006, and Helmut Lang to Japanese retailer Link Theory in 2006. Church's, the British footwear brand Prada acquired in 1999, remains in the portfolio but generates minimal revenue and has lost cultural relevance in the luxury footwear category dominated by brands like Loro Piana, Brunello Cucinelli, and even Prada's own shoe collections.
However, Berry noted that "Prada management has made positive corrections to their business model in recent years and it now includes new leaders who seem to have what it takes as long as they are patient and build on Versace's distinctive brand DNA." Guerra, who joined Prada as CEO in 2023 after leading Eataly and serving as CEO of Luxottica, has driven operational improvements including supply chain streamlining and governance reforms. Whether these improvements translate to successful brand integration remains uncertain.
What to Do Next
Publish A Three-Year Outlet Reduction Timeline With Quarterly Milestones: Communicate the repositioning strategy to investors, retail partners, and consumers with specific targets for outlet mix reduction, creating accountability and managing expectations.
Ring-Fence Versace's Brand Budget From Prada Group Overhead Allocation: Protect marketing investment during the turnaround by preventing corporate cost-sharing that dilutes brand-building resources needed to support premium repositioning.
Appoint A Standalone Chief Merchant For Versace With Full Assortment Authority: Install dedicated merchandising leadership with P&L accountability separate from Prada's product teams to ensure Versace's commercial strategy aligns with its creative vision.
Create Regional Pricing Architecture That Penalizes Outlet Arbitrage: Implement geographical pricing strategies that reduce the financial incentive for consumers to wait for outlet markdowns or travel to discount locations.
Launch A Versace Archive Collection At Ultra-Premium Pricing: Test full-price demand and brand equity strength with limited-edition reissues of iconic designs from the Gianni Versace era, gauging consumer willingness to pay for heritage.
Bottom Line: Brand Equity Takes Years to Rebuild But Quarters to Destroy.
Versace's 25% revenue decline and shift into operating losses under Capri Holdings demonstrates how quickly outlet dependency and promotional activity can hollow out a luxury brand, even one with top-five global awareness. Prada paid €580 million less than Capri did because seven years of value extraction left Versace financially distressed and strategically compromised. Guerra's acknowledgment that turnaround will require patience reflects the mathematical reality: reducing outlet mix means accepting lower revenue and margin pressure for 18-24 months while the brand rebuilds full-price credibility. Vitale's well-received creative debut provides narrative momentum, but runway success does not convert to commercial performance until product reaches stores and consumers prove willing to pay full retail.
The Prada-Bertelli family's 80% ownership stake removes short-term shareholder pressure, but Prada's failed acquisitions of Jil Sander and Helmut Lang establish a cautionary precedent. Versace's survival depends on whether Prada executes outlet reduction without destroying the revenue base needed to fund brand investment—a balance that requires both operational discipline and creative vision.
