Versace To Lay Off 350 Staff

The house of Versace has announced plans to lay off 350 staff, in a frank admission that major cost cuts will be needed to return the fashion business to profitability.

Calling the move part of a “comprehensive corporate reorganisation,” the house said in a press release that the radical downsizing was “designed to increase efficiency, return the group to profitability in 2011 and ensure its future growth prospects.”

“Trading conditions in the wake of the global financial crisis have been severe and the Company expects to make a loss in 2009,” the company’s recently appointed CEO Gian Giacomo Ferraris said in the release.

As a result, Versace plans to rationalize production facilities and review its extensive store network. The house quietly shuttered four boutiques in Japan last month, reflecting the tough market conditions. According to the house’s Web site, Versace has 93 boutiques in its global network, including 10 in North America, 26 in China, eight in Italy and five in Russia.

Ferraris further revealed that Versace will “reduce capital investment in 2010, and cut overhead costs.”

The house’s layoffs, which will be particularly severe in its logistics department, will reduce the total Versace workforce by some 25 percent. The label has been hurt by the crisis at Italian apparel manufacturer Ittierre, the maker of Versace’s jeans line. Ittierre went into the Italian equivalent of bankruptcy protection earlier this year, which has meant that Versace did not receive any royalties and could not earn revenue in markets where it distributes jeans directly, such as the U.S. and Thailand.

In 2008, Versace scored an 8 percent rise in group sales to 336.3 million euros, or $442.3 million at prevailing exchange rates. But Versace did suffer a 30 percent decline in 2008 net profit to 9 million euros, or $11.8 million. In 2009, sales have been stagnant.

“No organization can allow a situation like this to continue, especially considering the flat outlook for 2010,” added Ferraris. He added that he intends to complete the radical restructuring by the middle of next year.

Creative director Donatella Versace was not available for comment.

“I believe that the reorganization will create a platform from which the Group can grow strongly in the future," said Ferraris. "Versace is one of the most powerful brands in the luxury industry. It is at the forefront of creativity as underlined by the enthusiastic reaction of the press and buyers to Donatella’s spectacular Spring/Summer 2010 show at last month’s Milan Fashion Week.”

Though Versace is likely to close down more stores, it is also going ahead with openings. The house unveiled a boutique in Las Vegas last week, and plans another within the next six months in the gambling capital. It will also open boutiques in Delhi next month, Dubai and Australia.

Versace, a non-quoted company still largely owned by the founding family, is one of Italy’s leading international fashion design houses. Versace designs, manufactures, distributes and retails fashion and lifestyle products including Atelier, pret-a-porter, accessories, jewelry, watches, eyewear, fragrances, and home furnishings all bearing the Medusa logo.

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