Prada's Underperformance

Is Prada really going public this time? Bloomberg seems to think so. But is it taking advantage of a booming luxury-goods market, or is it having to accept a large discount to the kind of valuation it could have achieved when it first mulled an IPO? The story seems to want to have it both ways:

The company's potential value has halved from the time it first mulled an IPO in 2001. Analysts then estimated the company was worth as much as 8 billion euros, before the slump in the luxury industry and world stock markets that followed the Sept. 11, 2001 terrorist attacks...
The 14-member Bloomberg European Fashion Index has more than doubled since 2002. Bain & Co. estimates the luxury goods market may rise 50 percent a year in China during the next five years, while annual sales in Russia gain 20 percent.

So a slump in the luxury industry has led to Prada's valuation halving since 2001, yet at the same time valuations in the luxury industry have doubled since 2002? Something smells a little fishy.

I have a feeling that the reporters are hinting that due to mismanagement, Prada lost its way in the early years of this decade, buying up money-losing propositions like Jil Sander and Helmut Lang, taking on too much debt, and losing money in four successive years ending in 2006. At the same time, the rest of the fashion industry was actually doing very well.

But because this is the fashion industry, darling, it's not done to just come out and say that Prada has been a laggard for most of the decade – it's so much easier to blame September 11. It seems to work for Rudy Giuliani, why can't it work for Patrizio Bertelli?

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