Milanese chic vs British flair
analyse the pros and cons of these possible investment cases in detail. We hope this will be of
help to investors inclined to "bottom fish". We conclude that uncertainty is still high and that,
despite more compelling entry prices, it may be too soon yet to pull the trigger on them.
Two mega-brand challengers...
Ten years ago, Burberry and Prada were both less than one-quarter the size of LVMH’s F&LG
business. The gap has narrowed, but only slightly: Burberry is at almost 30% and Prada at 27%.
However, they have both expanded significantly compared with Gucci, Burberry from 55% to 90%,
Prada from 55% to 83%.
...at polar opposites on some points, yet very similar on others
Prada and Burberry are moving in opposite directions in Beauty. In Digital, Burberry is the
European leader whereas Prada has traditionally pushed back on e-commerce. Both have raised
their core pricing, but Prada has run ahead of LV and Gucci while Burberry has been a
follower. Aggressive moves into retail have worked well for both, but their networks have matured
and LFLs have already or are now fading. And both companies have taken big hits from China’s
woes. Both seem to put brand first and business second, with implications for strategic decisions.
The big questions
Using our proprietary data we have screened for strengths and weaknesses at multiple levels:
brand temperature, desirability, exclusivity, mix, pricing and digital competitiveness. This leads us
to the big questions on management, leadership and strategic direction.
Burberry is moving, Prada is still thinking
Both shares have lost their vim, though Prada’s multiples remain a tad more expensive. In the
current market, we look for exposure to ill-valued self-help stories with a high probability of
success. Burberry’s apparent inclination “to do what is required to succeed”, albeit with “more of
the same”, wins us over against Prada, where management still seems in “diagnostic mode”.