Prada’s Succession Plan Scores With Analysts
MILAN — Prada has set in motion its succession plan, putting an end to growing speculation about the management and design handover at the Italian luxury company — and analysts and observers gave the long-term thinking a thumbs-up.
On Tuesday, at the end of trading in Hong Kong, where the Prada Group has been publicly listed since 2011, the company said that former LVMH Moët Hennessy Louis Vuitton senior adviser and former Luxottica chief executive officer Andrea Guerra will be recommended as CEO at the next board meeting on Jan. 26.
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At the annual shareholders meeting for the approval of the 2022 financial statements, Patrizio Bertelli, who shares the CEO role with his wife Miuccia Prada, will be recommended as chairman and current chairman Paolo Zannoni will be suggested as executive deputy chairman of the board of directors of Prada SpA and, at the same time, chairman of Prada Holding SpA.
Miuccia Prada was confirmed as creative director of Miu Miu and Prada, the latter together with Belgian designer Raf Simons, and a board member. She will relinquish her role as co-CEO.
Last month, Simons, who has been co-creative director with Miuccia Prada of the company’s signature line since February 2020, said he was shuttering his namesake fashion collection after 27 years, leading to speculation about an increased commitment at Prada. But for the time being, the Italian designer is staying put. Actually, industry sources say she is increasingly involved in the design of Miu Miu, named after her nickname, a reflection of the designer’s inner musings, allowing her to freely express her creativity. The brand has also grown into something of a manifesto for diversity and inclusion and women’s empowerment.
“This is a fundamental step we have decided to undertake, while completely engaged in the company, to contribute more to the evolution of the Prada Group and to ease the succession of Lorenzo Bertelli, the future leader of the group,” jointly stated Miuccia Prada and Patrizio Bertelli, underscoring the importance of these changes. “We thank Andrea Guerra for being willing to take the job, with the aim of achieving a steady and sustainable growth. Andrea Guerra, with his long professional experience, has shown entrepreneurial skills in businesses where the founders are present and engaged, blending their culture and the needs of a company continuously evolving and active on international markets.”
Indeed, Luca Solca, senior research analyst, global luxury goods at Bernstein, touted Guerra’s extensive experience with the markets and working with companies where the personality of a strong founder or owner was surely felt on a daily basis, such as Merloni Elettrodomestici, an Italian maker of household appliances now known as Indesit Co.; Luxottica — founded by the late Leonardo Del Vecchio, and Eataly, conceived and launched by Oscar Farinetti.
“Andrea Guerra is an industry veteran and a very competent person,” Solca said. “My opinion is that he can be the right person to articulate the organization and the Prada processes, interfacing with the market and — without any doubt — to prepare the succession at the top of Lorenzo Bertelli, who has already done many excellent things since he has taken on the marketing responsibility. I hope it will help, I think it’s a good move.”
A possible retirement of Patrizio Bertelli, who is 76, has been in the news for a while, further fueled by the executive during Prada’s first Capital Markets Day in November 2021 when he pointed to a potential generational shift in three years.
Patrizio Bertelli’s choice is not a surprise as his son Lorenzo has increased his responsibilities and been a driver of change since joining the company in 2017. He was named group marketing director in 2019 and, additionally, head of corporate social responsibility in 2020. In May 2021, he joined as a director of the board.
The relationship between Patrizio Bertelli and Guerra is a longstanding one, as Luxottica started producing the Prada and Miu Miu eyewear collections in 2003. Also, veteran Luxottica executive Massimo Vian joined Prada as chief of industrial production two years ago.
To be sure, Guerra’s skills at working alongside strong willed entrepreneurs is seen as a plus.
Flavio Cereda, equity analyst at Jefferies, believes Guerra’s “experience and track record working with owners-entrepreneurs,” in addition to his knowledge of the market and investors, are important assets for Prada.
Guerra “is recognized as a leader with a strong charisma and stature,” said Giovanna Brambilla, partner at Milan-based executive search firm Value Search. “He is known for his ability to engage and motivate his collaborators at all levels, building loyal teams, communicating his objectives and bringing results.”
UBS analysts Susy Tibaldi, Zuzanna Pusz and Chris Huang in their report stated this “change will be seen positively by the market, bringing a strong professional track record to the group while de-risking succession, and the culmination of a series of changes within the business aimed at ensuring long-term sustainable growth.”
They see a “smooth leadership transition” based on the existing relationships between Bertelli, Guerra and Vian.
They believe “the market is likely to react positively to the management changes,” admitting that Lorenzo Bertelli “has been instrumental in some of the initiatives of the group (marketing, digital, ESG),” but that “it would have likely been too early for him to take on the role as group CEO.”
UBS noted that Guerra “has a proven track record,” as sales at Luxottica under his watch more than doubled in a decade, growing to 7.7 billion euros in 2014 from 3.2 billion euros in 2004 and the share price tripled to 41 euros. “While in the later years at Luxottica he was criticized by some for not having a strict-enough control of distribution and discounting, we think these risks are limited with Prada having gone through a clean-up of wholesale distribution and removed markdowns in store.”
Guerra was conscripted in early 2020 as CEO of the newly created LVMH Hospitality Excellence division, but last May he became a strategic and development senior adviser to the group.
He left eyewear group Luxottica in September 2014 after 10 years working with Del Vecchio. He was instrumental in the growth of the company, which became a world leader in its sector through innovation and acquisitions, including the purchase of U.S. sports eyewear firm Oakley in 2007.
After Luxottica, Guerra became a onetime strategic adviser to former Italian Prime Minister Matteo Renzi and then joined Italian high-end food emporium Eataly as executive chairman in 2015.
At LVMH, he took over an entity that encompasses Hôtels Cheval Blanc and the Belmond Hotels & Luxury Trains and also became a member of the luxury conglomerate’s executive committee. Ultimately, his purview was widened to include oversight of the Fendi and Loro Piana businesses, as well as Thélios, the Italian eyewear firm that LVMH took full control of last year.
Guerra will join after the Miuccia-Raf collaboration helped boost the group’s bottom and top lines. As reported in March, Prada returned to profitability in 2021 after a strong second half, driven by increased sales of handbags, footwear and ready-to-wear, which saw a 53 percent jump in revenues compared with 2020 and a 16 percent increase on 2019.
In the first half of fiscal 2022, the group smashed projections.
Retail sales, which account for 90 percent of group revenue, rose 26 percent to 1.7 billion euros, while overall revenue for the period was up 22 percent to 1.9 billion euros.
The gains came from double-digit increases at all the group’s brands, and all the main product categories and geographic regions.
Net income nearly doubled to 188 million euros.
Commenting on the first half figures, Patrizio Bertelli said in July the double-digit rise in ready-to-wear sales was a result of the Prada brand “going back to its roots.”
To be sure, for fall, the codesigners put a fresh spin on the brand’s DNA for the streetwear-loving set.
They worked with classic crewneck and geo-pattern knits; finely tuned tailoring; ladylike full skirts; sheer innerwear, and lots of jeweled embellishment.
It was heritage Prada rebooted for a socially savvy generation. In the first half, Prada brand sales were up 28 percent; Miu Miu, 14 percent, and Church’s, 29 percent.
