Thursday, April 2, 2009

Fashion Biz - Prada in Peril?

Rem Koolhaas designed Prada Store on Rodeo Drive

Prada May Reorganize Debt to Fund New Stores as Sales Suffer
April 2 (Bloomberg) -- Prada SpA’s owners may ask banks to reorganize 1.2 billion euros ($1.6 billion) of debt, freeing cash to open new stores and promote the luxury label’s brands in the recession, two people with knowledge of the plans said.
Sales at stores open at least a year fell in 2008, reducing Prada’s cash on hand, while earnings declined as fixed costs rose, the people said. The Milan-based company may ask for some debt payment deadlines to be extended, they said, asking not to be identified because the plans are confidential.

Luxury labels are taking different approaches to expansion as a five-year industry boom crumbles, depending on their access to cash. Kelly bag maker Hermes International SCA vows to open or refurbish 20 stores in 2009, while jeweler Bulgari SpA has put new stores on hold and will close some outlets. Sanford C. Bernstein analyst Luca Solca forecasts the industry’s sales will fall as much as 15 percent this year.
“Unlike in previous recessions, luxury brands are contracting, though the biggest names are suffering less,” Moody’s Leschiutta said.

To raise the brand’s profile, Prada is building an exhibition space in Seoul, designed by architect Rem Koolhaas, that can be flipped by cranes to change shape for new events.

I love the store architecture and design by Rem Koolhaas, but is it really necessary for Prada to raise its brand profile? Seriously, who doesn't know about Prada?

Maybe instead of spending so much on the build out of the stores...although I love buildings that can change shape for events...they could lower prices slightly and increase their sales.
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