**Versace’s Shift in Strategy Leads to Major Sale to Prada**
Fashion executive John Idol aimed to transform Versace by toning down its ornate designs and increasing prices. After acquiring the brand through Capri Holdings Ltd. in 2018, Idol projected that his strategy would double Versace’s revenue within a decade. However, six years later, that vision has faltered. Idol has sold Versace to Prada SpA for $1.38 billion, resulting in a loss of approximately $700 million, while sales growth has significantly lagged behind expectations.
Capri anticipates that Versace will generate around $813 million in revenue for the fiscal year ending in March, which is a decline from the $843 million reported in fiscal year 2020, the first full year under Capri’s management. The brand’s future now lies with Prada, which has adeptly navigated the recent downturn in luxury spending, reporting a 17% revenue increase in 2024. In contrast, analysts predict a 20% sales decline for Versace in the upcoming fiscal year compared to the previous year.
Capri also owns the Michael Kors and Jimmy Choo brands, both of which have experienced sales declines. Following the announcement of the Versace sale, Capri stated it would reinvest the proceeds into Michael Kors. Bernstein analyst Aneesha Sherman suggested that selling Jimmy Choo might also be a beneficial move for Capri.
When Idol took the helm at Versace, the brand was recognized for its extravagant designs and iconic Barocco print. However, he later shifted the focus towards the more subdued “quiet luxury” trend, believing that Versace had become overly dependent on its signature print. Idol admitted that the transition was too abrupt, as affluent shoppers embraced the new designs, but mid-tier customers, who are crucial to Versace’s sales, did not respond positively.
Revenue growth began to decline, with Sherman noting that the turnaround story did not unfold as intended and that the strategies employed were not effective. Compounding the issue, Versace raised prices and reduced the availability of affordable items. Idol acknowledged the misstep, stating, “We went too far, too fast,” and noted that former customers expressed concerns about the brand’s new direction.
In response to these challenges, Versace is now working to rectify the situation by lowering prices on key items. For instance, silk shirts will start at $990 instead of around $1,500, and sneakers, such as the Galaxia style, will be more accessible, starting at $550.
**FAQ**
*What led to the sale of Versace to Prada?*
The sale was prompted by significant revenue declines and a failed strategy to shift Versace’s brand identity, resulting in a loss of approximately $700 million for Capri Holdings.
