Versace Pulls Back, Aiming For Profitability

Posted by Sara Zucker on November 4, 2009 10:06 AM

Last week, Milan's Versace Group announced that it would cut 26% of its worldwide workforce and consolidate its operations in an effort to return to profitability by 2011. The fashion house has also made plans to close all three of its stores in Japan due to poor sales, though the company's business is successful elsewhere in East Asia.

“We’re reviewing in a comprehensive way the whole structure of the company,” Giangiacomo Ferraris, the chief executive, said by telephone. “Operating costs have been rising since 2006, and because of the economic situation we need to have a more flexible operation.”

He said the company, which is unlisted, would post a loss of about $30 million, or $45 million, for 2009 and expected 2010 results to be “flat” at best. By 2011, however, he said, revenue would be growing by about 3 percent or 4 percent, and combined with cost cuts, bring a return to profit.

Analysts believe that the challenge of overcoming such a poor economic state is greater for small, family-run companies like Versace, which may lack effective distribution scales to compete. In this recession, some brands are pushing themselves to the limit while others have realized that a step backward must be taken in order to plan for a successful future.

More about: Fashion, Versace

Mary Reisel says:

From what I see in Japan in the last decade, the crisis in high brands is deep and goes far beyond Versace or distributing capacity. Brands should have started preparing long ago since the signs were there for a couple of years now. There was a need to make major strategic changes in the brand perception as well as in the philosophy of customer relations at the beginning of the decade.

Greg Furman is talking in another article about the "inherent value" of brands, I am afraid that for many of the future consumers it is no longer there. During the last 2 years, I see this generation of youth withdrawing more and more from brands as well as from foreign products. They buy H&M but surveys show they prefer Japanese Uniqlo and local commodities. They also invest more cash in cosmetics and hair styling than in clothing. In addition, many companies leave Japan believing they will have more success in other countries around, an idea that the article about Apple in China here proved to be wrong just a few days ago.

What market research in Japan needs is the same thing that the big brands need: to have the courage, imagination and insight to restructure their whole ideology and methodology to meet new decade in the world of consumption.

November 5, 2009 05:16 AM # Reply