Versace back in profit

After many seasons of making losses, cutting costs and revamping its business, Versace posted an operating profit that comforts its decision to remain independent, its chief executive said in an interview on Tuesday. "We are building

muscle for the future," Versace boss Gian Giacomo Ferraris said. "The goal is to remain independent because the family owners say they want it to be private."

Versace back in profitThe luxury-goods sector is set for a wave of consolidation after industry number-one LVMH Möet Hennessy Louis Vuitton snapped up Italian jeweler Bulgari SpA and a stake in French leather-goods house Hermes International in the last five months. Analysts say the high price LVMH paid for both acquisitions could convince other labels—many of which are family-owned—to cash out.

Versace, though it has struggled for years, won't be one of them, Mr. Ferraris said. Versace has reduced its debt significantly and can now afford to expand, Mr. Ferraris said. Though the house famous for its Medusa logo is one of the smallest major names in high-end fashion, it doesn't need the financial might of a luxury-goods conglomerate to open stores and buy advertising space, according to Mr. Ferraris.

Last year, sales rose 9.1% to €292 million ($411.5 million) from €268 million, and operating profit swung to €22.3 million from a loss the year before. Versace said it had a net loss last year but didn't disclose the amount.

Versace has suffered ever since its founder Gianni Versace was shot dead in 1997. Saddled with debt, it was hit hard by the global financial crisis three years ago. The family of Mr. Versace, including his designer sister Donatella, clashed with the then-chief executive over how to shore up the label. The family, which owns the company entirely, brought Mr. Ferraris on during the summer of 2009.

The restructuring that Mr. Ferraris put in place weighed on Versace's results. Shortly after he joined from fashion house Jil Sander, Mr. Ferraris cut a quarter of Versace's workforce, or 350 jobs, and shut the brand in Japan, one of the biggest markets for luxury fashion. He moved nearly all of Versace's manufacturing to external Italian suppliers, keeping only the initial production steps, such as pattern-making, in-house. Now Versace's supply chain is centralized in one location near Milan, Mr. Ferraris said.

Mr. Ferraris's eye is on meeting his five-year goal to double sales by 2015. To that end, he is bringing the license for Versace's secondary line Versus back within the group. He is also planning to reintroduce Versace to Japan in September with the opening of two stores in Tokyo and Osaka.

Image: Versace SS11
Source: Wall Street Journal

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