Italian fashion company Prada Group NV (PDA.YY) announced the sale of its Jil Sander brand to private equity fund Change Capital Partners (CCP.YY), ending a lengthy search for a buyer for the struggling German minimalist label.
The sale will allow Prada to draw a line under years of management tumult and losses at Jil Sander, allowing it to focus on its star Prada brand and develop its younger Miu Miu label.
Change Capital, a private equity fund founded by Belgian entrepreneur Luc Vandevelde, the former chairman of Marks & Spencer Group PLC (MKS.LN), said in a statement that the fund will keep the current design and management teams at Jil Sander in place and will put money into the brand to develop new product areas.
Prada declined to say how much Change Capital is paying for Jil Sander and said no bankers were involved in the deal. The label should generate EUR140 million ($164.7 million) in sales this year and reach break-even on an operational basis, Prada said in a statement. In 2004, the last year for which Prada has published results, Jil Sander's revenue was EUR137.5 million. Prada Group will publish its 2005 results in late spring.
The sale comes nearly two years after Jil Sander began an extensive restructuring effort. In May of 2004, Prada hired Gian Giacomo Ferraris away from rival fashion company Gucci Group to become chief executive.
In November of that year, designer Jil Sander resigned, leaving many to wonder whether the fashion house would survive without the founder's vision. Nonetheless, Belgian Raf Simons, who was hired in July of last year and presented a collection in Milan just this week, has received good reviews from retailers and the fashion press.
The road to a Jil Sander sale has been long. Prada bought the company in 1999 as part of an acquisition spree during the late 1990s luxury goods boom. Prada Chief Executive Patrizio Bertelli immediately ran into trouble, however, when designer Sander left abruptly after just a few months because of clashes with Bertelli. Sander ended up returning after 18 months, but the fashion house kept losing money, posting a loss of $36.7 million in 2003 and EUR22 million in the first half of 2004.
The financial troubles at Jil Sander were clouding success at Prada's main label. So, Bertelli last year moved the fashion house and Helmut Lang - another unprofitable label - out of group structure that includes the Prada and Miu Miu labels. Prada justified the move by calling the two labels non-strategic brands that were put on the block.
In preparation for a sale, Prada has cut costs at Jil Sander by moving all its operations and headquarters to Milan from Hamburg. All of Jil Sander's production now is located in Italy, and Prada has built up the fashion house's accessories business, which is more profitable than ready-to-wear.
Designer Helmut Lang left his eponymous brand early last year. Prada recently decided to discontinue the brand for the time being, with no new collections expected to arrive in stores after the current fall and winter line.
