Buying a Wounded Icon

On paper, Versace looks like the kind of brand you sell because you have to, not because you want to.

Revenue has been sliding, profits have vanished, and its outlet-heavy distribution has pulled the logo downmarket. Yet Prada still wired roughly €1.25 billion for the business and is publicly preparing investors for a long, messy turnaround.

That is the kind of move owners and operators should pay attention to. It is a live case of a disciplined buyer paying up for a business that is clearly underperforming today, because they believe the brand’s share of mind is worth far more than its current share of wallet.

The question is not “Why would they buy this” but “What did they see that the headline numbers do not show”.

Versace’s biggest problem is not obscurity. The name is still globally recognised, the aesthetic is unmistakable, and the brand continues to show up in pop culture in a way many “healthy” businesses never will.

The problem is that the cash coming in no longer matches the attention going out.

Prada is betting on that gap. They are buying under-earning attention and backing themselves to translate cultural equity into financial performance. That is very different from paying a premium for a brand that is already optimised. It is paying a meaningful price for a business that has been leaving money on the table.

For owners, this is the first lesson. Buyers do not just value what you are. They value what you could reasonably be in the right hands.

Versace’s issues are serious but specific.

Too many outlet stores. Too much reliance on discount channels to hit short-term numbers. An assortment that leans heavily on ready-to-wear while accessories and footwear lag peers. Underused potential in categories like menswear, jewellery and home.

None of that is easy, but it is fixable. These are operational and strategic problems, not a death sentence for the brand.

Prada believes its industrial machine can address exactly those pain points. The group has invested heavily in Italian manufacturing, tightened up its own retail network and proved it can revive a label with the turnaround of its secondary brand Miu Miu. Plugging Versace into that system is the thesis.

When a buyer is willing to look past losses, it is usually because they have a very specific list of levers they plan to pull.Time and control

The other thing Prada bought is time.

The founding family still controls the group and has already told markets that the Versace rebuild will not be quick. The plan includes pulling back from easy outlet revenue, investing in product and brand, and accepting that the first twelve to twenty four months may not flatter the consolidated income statement.

That stance only works when three conditions are true.

Most mid-market buyers do not have all three. Prada does. That is what makes the same set of numbers look like a risk to one owner and an opportunity to another.

Capri, Versace’s previous owner, tells the other half of this story.

They bought an iconic brand in 2018 with big ambitions, never quite cracked the formula and are now selling at a lower headline valuation while using the proceeds to reduce debt and refocus. Over their tenure, Versace’s revenue shrank and its positioning drifted just as the luxury market swung toward quieter, more understated brands.

There are three hard lessons in that arc.

First, delayed course correction is expensive. The longer you wait to pull back from discount channels or overhaul a tired assortment, the more corrective work the next owner has to underwrite.

Second, fame is not a moat. A household name can still see its valuation fall if the underlying performance does not keep pace and the market mood shifts.

Third, if you cannot or will not execute the turnaround yourself, you have to package the upside clearly for someone else. Capri at least left enough transparency in Versace’s numbers and priorities for Prada to see a path forward and believe the asset was under-managed, not broken beyond repair.

Most businesses will never trade for luxury multiples, but the logic behind this deal travels well. Inventory where your brand is under-earning its attention, be honest about how short-term tactics like heavy discounting or over-wholesaling may be eroding your pricing power, document the operational fixes a capable buyer could implement, and then decide whether you want to be the platform that executes or the seller who frames the opportunity clearly for someone else, because disciplined buyers are not scared of bad years, they are scared of unclear problems and vague upside.

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