By
Bloomberg
Published
November 10, 2024
After transforming a small leather shop in Milan into a $19 billion luxury empire, Miuccia Prada and Patrizio Bertelli have taken the first steps on a long-term path to secure the future of Prada SpA.
Lorenzo Bertelli, the billionaire couple’s eldest son, has already taken key ownership stakes as he gathers experience in day-to-day operations by leading marketing and sustainability units.
Succession is a critical issue for Italian family-owned businesses like Prada, and it’s not typical that founders take action, especially when they remain heavily involved.
But the 76-year-old Miuccia and the 78-year-old Patrizio are intent on handing over the reins in a way that ensures Prada can maintain its independence. That’s a significant challenge in the high-stakes world of luxury where multi-brand giants like LVMH and Kering SA dominate.
Italy has seen one brand after another scooped up by bigger global players. LVMH owns Fendi and Loro Piana and has recently bought a stake in the company that controls Moncler SpA. The LVMH-backed fund L Catterton was central in taking shoemaker Tod’s SpA private. Kering owns Gucci, Bottega Veneta and has an option to gain control of Valentino.
The risk for Italy is getting sidelined as decision-making shifts to Paris, London and New York, even though some 80% of luxury goods sold globally pass through Italian workshops and factories, according to Patrizio. For the families behind the brands, it means a loss of control and prestige.
To gird against that fate, Miuccia — dubbed internally as “La Signora” — has preemptively transferred ownership of almost all her shares in key entities, according to Italian filings. Even as she maintains voting rights, Lorenzo, 36, was given 50.5% of her holding company Ludo SpA. His younger brother Giulio — who isn’t currently planning to work for the family business — got the rest.
Patrizio hasn’t so far made similar moves and maintains full control of his investment vehicle, Italian filings shows. That won’t change Lorenzo’s position though, as his holdings could be divided three ways since he has a daughter from another relationship. Also, Patrizio — the mastermind of Prada’s industrial expansion — firmly supports the move.
In a Bloomberg interview in 2021, he said it would be up to Lorenzo to decide when he’s ready to take the reins of the group. At the time, the elder Bertelli said he could hand over in about three years.
The ownership transfer means the former rally driver is set to own the biggest stake in the family’s holding company, which holds 80% of Prada. That would underpin his growing role at the company. Lorenzo’s list of titles include chief marketing officer, head of corporate social responsibility and executive director.
While Lorenzo told his parents years ago that he was prepared to work in the family business, leading the group successfully will be difficult. In the hit-or-miss world of luxury, the next stage of Prada’s story could harbor greater turmoil. The conditions that allowed Miuccia to make Prada into a global sensation no longer exist.
Demand in China, which drove a long boom in luxury goods, has faltered. And increasingly, size matters. Smaller houses like Prada struggle to keep up with the investment needed to compete with global giants, and prime locations on luxury shopping streets in Milan, New York and Shanghai matter almost as much as having the right collection.
Prada and the family’s holding company recently spent over $800 million to expand its New York presence with the acquisition of two buildings on Fifth Avenue. That’s before the cost of renovations and represents a significant undertaking for a company like Prada, which had revenue of €4.7 billion in 2023 — compared with over €86 billion at LVMH.
Prada SpA’s revenue rose in the third quarter, thanks to its Miu Miu brand, which more than doubled sales. During the period, both labels remained in the top three of the “hottest” names in a ranking compiled by Lyst Index, which tracks searches and social media mentions. Bernstein analyst Luca Solca said Miu Miu has potential to further double annual sales to about €2 billion.
Lorenzo has had a crucial role in Prada’s performance in recent years, according to people familiar with the group’s internal workings. But the succession strategy is broader than just an ownership transfer, with the scion being flanked by trusted luxury veterans.
Raf Simons — the former creative director at LVMH’s Christian Dior — was named co-creative director of Prada’s eponymous label in 2020. There’s also a new managerial team at the group led by Chief Executive Officer Andrea Guerra and Vice President Paolo Zannoni, and a new organizational structure in which its brands are run as separate units with their own managers.
Prada’s moves aren’t common in Italy. Many local companies were founded as the economy boomed in the 1960s and 1970s. Some patriarchs like Giorgio Armani are now in their 90s. Leonardo Del Vecchio — founder of Ray-Ban owner EssilorLuxottica SA — passed away in 2022 with heirs still divided over succession issues two years later.
In many business families, discussions about handing over to the next generation are taboo, which leaves heirs insufficiently prepared and opens the doors to disputes. John Elkann, head of the Agnelli family, which founded carmaker Fiat, is still fighting in court with his mother Margherita Agnelli. Miuccia and Patrizio though are keen to ensure that “Prada-ness” survives them.
While Miuccia inherited the shop in central Milan, she was an unlikely fashion maven. A committed leftist and feminist activist in the 1960s, she broke with traditions that she benefited from. That iconoclasm helped develop innovations such as the Prada nylon rucksack in the 1980s. Her “ugly chic” collections made Miuccia one of the world’s most influential designers.
She also knows how and when to cede control and collaborate to maintain links to youth culture. Maintaining that freshness will be key for Prada’s future.
Miuccia is “very smart about choosing to work with people who reflect her sensibility, but also are of a younger generation,” said US designer Marc Jacobs.
Adapted from Prada, una storia di Famiglia by Tommaso Ebhardt, out in Italian on Nov. 12 and published by Sperling & Kupfer.