Burberry throws its hat in the ring, and Prada puts its best foot forward

The luxury goods firms of choice for supermodels and hooligans are coming to market

Forget your Focus Wickeses, HMVs and William Hills, European markets will get a touch of glamour this summer when two highly fashionable companies grace investors with their presence.

Burberry, the company that brought us the fashion craze for beige, checked fabric, is heading for a partial flotation on the London Stock Exchange, while Prada, the Italian fashion house that also owns Jill Sander and Miu Miu, is looking to float on Milan's stock exchange.

At one time it would have been an unfair contest. Prada has been at the cutting edge of fashion for over a decade and is owned by the very fashionable and very Italian husband-and-wife team, Patrizio Bertelli and Miuccia Prada. Bur- berry was once known for its unremark- able raincoats, and did thoroughly British things like designing coats for the Army in the First World War. Its owner, GUS, did nothing for Burberry's image, as it also owns the Argos stores.

But in the five-year reign of chief executive Rose Marie Bravo, an Italian-American who grew up in the Bronx, Burberry has evolved from geek to chic. Her relaunch led to celebrities like Nicole Appleton and Posh Spice wearing the checked fabric, while the company's catwalk shows got the industry talking. Ms Bravo is believed to be earning over £1m a year; her exact salary will be revealed at the end of the month when the prospectus is published.

Now the two companies can be compared as peers. "Both brands sit at the same level in the market," says Anne Pitcher, the womenswear and accessories buying director for Harvey Nichols. "Both have been huge influences [in the fashion industry], with their particular spirit and independence."

Despite their trendy credentials, it may be a strange time for the two companies to go public. The luxury goods sector isn't feeling financially glamorous. After 11 September, and the eco- nomic slowdown, customers in Asia and the US are watching the pennies. And the companies in the sector that are already on the stock market are out of fashion with investors.

LMVH, the firm behind Verve Clicquot champagne and the Donna Karan clothing brand, has issued a string of profit warnings, while Italian jeweller Bulgari recently announced that its first-quarter profits had more than halved. Investors' views on the industry were not improved by last week's profits warning from designer brand Hugo Boss, which has slashed forecasts due to inventory "discrepancies".

However, Burberry has appeared to buck the trend after reporting relatively healthy financial results. When the company announced its flotation plans last week, it also revealed that sales were up 14 per cent to £499m and pre-tax profits had grown 30 per cent to £90m in 2001.

This seems to defend it from the criticism that if it had floated during the check craze – with everyone from Kate Moss to football hooligans sporting the ubiquitous gingham – it could have capitalised on the brand's visibility. "The company is not just about beige check; the last results vindicate that," says one analyst.

It also proves that the company has survived the departure of Roberto Menichetti, the designer who had led its rebranding. Now the 31-year-old Chris Bailey, who came from Gucci, is proving successful. "In the recent collection, [the company] has said 'we arrived with check but we are a luxury brand that produces high-quality goods'," says Lorna Hall of Drapers Record magazine. "Ms Bravo knows who the luxury goods custo- mer is. Year in, year out, the customer isn't somebody who wants to be at the height of fashion."

At Prada, the financial situation is not so impressive. Profits last year slumped to €80m (£51m) from €127m the year before, but the company is believed to be heading for a £2.5bn flotation, compared to Burberry's maximum price of £1.8bn.

"It is true the results have not been particularly good, but it was a difficult year, and it was integrating acquisitions such as Jill Sander and Helmut Lang," says Sagra Maceira de Rosen, a luxury goods analyst at investment bank JP Morgan.

Some are predicting that the market for luxury goods will make a comeback. "A lot of the companies had a weak first quarter because of the severe impact of 11 September on tourism," says an analyst at Citigroup. "The fact people are going back to more normal lives will provide a substantial level of growth ... We expect a substantial rebound in the second half of the year."

While Prada and other luxury firms have suffered in the US, in Asia there is a different problem. Poor legislation to protect copyright and intellectual property means that piracy flourishes. The company has a large team of lawyers working to try to keep the brand under control. But even in the UK, Prada has to work hard. Recently it spent £100,000 on an advertising campaign to distance the company from a large discount sale of its products in Earls Court, west London.

A spokeswoman says unofficial trading of the products is a "huge" problem and that lawyers are preparing legal action to stop the sale in its tracks. "With the kind of service and quality we guarantee, people have grown to know that behind a Prada bag and pair of shoes, there are very high quality standards."

This is also an issue at Burberry. It regularly threatens court action against traders who sell counterfeit Burberry checked goods that deluge market stalls. Despite the over-exposure of that fabric pattern, Ms Pitcher at Harvey Nichols says this ubiquity has not done Burberry any damage; rather it has been the "powerhouse" of the company. "Burberry has long been an established British brand, but it has recently developed into a global brand," she says. "It has moved from a classic brand to a fashion brand."

And while Prada can probably claim to have a more selective customer base, mainly because it is more expensive, Burberry transcends class boundaries, she says. "It welcomes a wider aud- ience. It is worn at all levels, from young to old, from kids who have saved up for months to Posh and Becks."

As one would expect for an exclusive brand, Prada has a famously tempestuous chief executive in Patrizio Bertelli. He can reputedly rant and rave for an hour before calming down.

While a first glance at Burberry's Ms Bravo would suggest a more gentle character, she can inspire fear. "She scares the hell out of me," says one male analyst. "She looks like a ball-breaker."

But Ms Maceira de Rosen at JP Morgan is inspired rather than intimidated by Ms Bravo. "She is terrific – a fantastic, fantastic manager. She makes everyone around her enthusiastic."

Burberry's owner, GUS, will hope that Ms Bravo can also make investors enthusiastic about the company's flotation, while perhaps at Prada, Mr Bertelli will just scare them into it.

However, with the traditional rows, tempers and tantrums that are such a part of the fashion industry, neither flotation should be boring.