Catfight On The Catwalk

By Belinda Luscombe

When she took over the family business 20 years ago, Miuccia Prada came with an unusual pedigree. The dark-eyed Milanese was not only the scion to an 85-year-old family leather-goods business but also an active communist who dabbled in mime. An odd combination, perhaps, but evidently terrific preparation for the world of fashion, where Prada's mime-quiet minimalism has made her fashion house into the decade's most powerful design force.

Last week her firm announced its intention to become a powerful business force as well. Under the careful eyes of Prada's husband Patrizio Bertelli, its managing director, the firm grabbed 5% of rival fashion house Gucci for a little more than $120 million. The acquisition, akin to Hyundai's biting off a tasty chunk of Honda, had many manicured hands scratching coiffed heads--including some at Gucci's Florentine headquarters, which released a terse statement: "No agreement has been entered into with the Prada group, and no discussions are contemplated. Gucci did not solicit this investment."

The idea of a Prada takeover of Gucci would have seemed risible 20 years ago, when Gucci was among the world's great brands and Prada was a leather-goods firm with a boutique in one of Milan's historic shopping arcades. But since Prada and Bertelli united--in marriage and business--in 1987, they have turned a respectable business into fashion's most watched house. They added footwear, women's ready-to-wear, a younger collection called Miu Miu, menswear, underwear and sportswear. Prada's design sense has made her the most influential designer of the decade, with a ripple effect being felt as far down as the Gap. She has an exquisite offbeat sensibility, creating clothes that look simple, even plain, but are incredibly luxurious. Her first successful item, the logo-less (in the '80s!) black nylon backpack, is still emblematic of her way: discreet but not mousy, individual but not outre.

And the look sells. The single boutique in Milan has grown into a Prada empire of 120 shops around the world. Last year the firm opened 27 flagship stores and 13 in-store boutiques. This year it is planning 15 Prada stores (in such places as Chicago and Taipei) and five Miu Miu shops. According to Bertelli, Prada had a pretax profit of $130.1 million on revenues of $674 million last year. This year he expects $150 million on sales of $824 million--tidy numbers for a family firm.

Gucci has been on a much hillier path. After years of mismanagement by the Gucci family, the company finally went public in 1995, and its fortunes began to rise like hemlines. With the help of 36-year-old American designer Tom Ford, CEO and president Domenico De Sole transformed Gucci from the butt of jokes about men who wear loafers to a label both Seventh Avenue and Wall Street adore. (Ford's first famous look: velvet hiphuggers and a satin shirt.) Incontrovertible evidence of how far it has come: Helen Hunt wore Gucci to the Oscars this year.

Gucci's sexy but sleek designs still press all the fashionistas' buttons, but the firm has been buffeted by other ill winds, from the ongoing trial in Italy of Patrizia Gucci (charged with murdering her ex-spouse Maurizio Gucci, grandson of the company's founder) to worries about the fallout from the Asian financial crisis. Last September, when De Sole announced that profits growth for 1997 would be lower than expected, Gucci stock plummeted almost 20% in one day. Sure enough, the company announced last week that this year's first-quarter net profit had dropped 10% from last year, from $48 million to $43.1 million. On top of this, the Prada purchase has highlighted Gucci's lack of defenses against a hostile takeover bid.

There is no love lost between the two houses. In an interview last year, Bertelli accused Ford of stealing his wife's ideas: "They did black nylon bags and put their bamboo handles on them; they did our high-gloss calfskin--they started using all our materials," he said. "It doesn't make sense. Gucci should follow its own strategy, not mine." Such bluster, says a Gucci spokesman, is common among fashion designers. Ford and De Sole have ignored it.

So just what is Bertelli's plan? According to the Italian newspaper La Repubblica, Bertelli said he had not donated $120 million to charity. "I sent them a very clear message: let's make the move official, let's discuss possible collaboration between our two companies," he said. "I own a private company, and I can't be taken over. Here's what I'm telling them: let's merge the two companies so Gucci will no longer be subject to a takeover." He later denied part of this, but he has talked before of turning Prada into a multinational, multibrand house like LVMH, the French conglomerate that specializes in the whims of the very wealthy, from Louis Vuitton luggage to Christian Dior gowns.

Bertelli's latest bid, says an Italian financial analyst, leaves little downside for Prada: "He's in a win-win situation. He's probably trying to put together a group so that he can go to a shareholders' meeting with 10% to 15% of the company. Given the broad ownership of Gucci, that would put him in a position to wield some power. If that doesn't work, at least he's put the company in play and could make $10 million or $20 million off the deal." There is even talk that Bertelli, a sailing fan, is just fund raising for Prada's bid for the America's Cup.

What he is most likely trying to do is continue the steady upward and outward trajectory he has plotted for Prada. And Miuccia Prada--the onetime aspiring communist--has evidently embraced her husband's capitalist dreams.

--Reported by Greg Burke/Milan and Julie K.L. Dam/London

With reporting by Greg Burke/Milan and Julie K.L. Dam/London