Versace makeover brings back profit

A model presents a creation for Versace's 2006/2007 Autumn/Winter collection. Picture / Reuters

Versace returned to a pretax profit in the first half of 2006, leaving behind more than five years in the red thanks to a radical turnaround cure, more wearable collections and a focus on high-margin accessories.

Versace, a favourite with publicity-hungry celebrities for its "barely there" dresses, says its profit was €2 million ($4 million) against a loss of €7 million in the same period last year.

"Returning to profit was our target for 2007 but we've reached it now," said Chief Executive Giancarlo Di Risio .

"There are three main points that have helped us: growth of wholesale revenues, improved profitability and sales at our boutiques, and our accessories business."

The fashion house slid into heavy losses in the 1990s after its flamboyant founder, Gianni Versace, was murdered and his sister Donatella succeeded him as designer.

Since Di Risio took charge in 2004, he has stripped away unprofitable businesses and introduced a focus on accessories such as shoes and bags, opening an accessories-only factory outside Milan.

Accessories have come to make up 30 per cent of turnover and boost the bottom line because of their fat profit margins.

"We have made a precise choice to expand our luxury accessories business, but our clothes sales are also good. The last Versace collections were going very well," Di Risio said.

Donatella has changed the style of her catwalk collections, moving from clinging PVC dresses in shock colours to softer lines and gentler shades, helping stop a decline in sales.

"It's a new route, a new Versace. Donatella Versace has found a style that's a lot more refined, elegant and up-to-date," Di Risio added.

Revenues came in at €148 million, lower than last year's €149 million because Versace sold off unprofitable licences and renovated seven or eight boutiques to replace their opulent gold interiors with a sleek white leather and steel design.

Versace has also overcome years of heavy debts, reaching a positive net financial position of €16 million by the end of June.

Although Versace reached its turnaround targets early, Di Risio said Donatella and her co-owners, her brother Santo and daughter Allegra, would wait until the restructuring finishes at the end of 2007 before deciding on a bourse listing.

The fashion house is paying tribute to its 1990s glamour days with a new ad campaign featuring its favourite supermodels from that time, including Kate Moss.

Moss is back in demand after a drug scandal prompted several fashion houses to sever ties with her last year.

- REUTERS