Fashion Rocked - 09/12/2009

The world of fashion and the luxury goods sector thought themselves unlikely to be very affected be the current economic situation, believing that their target client, the extremely wealthy, would be untouched and would still carry on consuming in the same profligate manner. One by one the fashion houses, even the great ones, appear to be unravelling, some have been revealed as showing an astonishing lack of financial management.

The young Louella Bartley's business has not so much fallen over as been pulled over by the demise of the Italian manufacturer Carla Carini on whom she relied to make her products. Unable to fulfil the orders for her new range her main investor Club 21 withdrew its support.

Another fashion deity sunk, this time by debt, is Christian Lacroix. The company has finally been forced to reduce the whole operation to little more than an administrative office with 11 staff retained to supervise the perfume and accessories licensing contracts. The frantic search for a business saviour whilst the company was in administration proved fruitless, not really a surprise considering the losses running at £9.1 million, rumoured debts of 44 million Euros and the breathtaking announcement that the fashion house had not made a profit in 22 years. A wealthy Middle Eastern investor was interested but was unable to provide the guarantee to support the project and another offer hit the buffers leaving Lacroix with little choice but to accept the ruinous restructuring plan. The devastated seamstresses, Lacroix's "golden hands" have little chance of finding work at the same level in today's climate.

The Italian fashion house of Versace has been obliged to shed 350 jobs following a review conducted by the newly appointed CEO Giacomo Ferraris. A more "root and branch" re-organisation will follow to sharpen efficiency and steady the company for future growth when the tide turns. The Times reports Mr. Ferraris saying "trading conditions in the wake of the global financial crisis have been severe and the company expects to make a loss in 2009. No organisation can allow a situation like this to continue". The highly experienced Mr. Ferraris (former MD of Gucci and former boss of the Jil Sander Group) is wisely taking rigorous action before it is too late.

Clearly some brands have relied on their past glories and the assumption that their market would be impervious to the current economic climate has proved to be way off the mark. The wake-up call is ringing round and the whipping into shape is starting, in some cases not a minute too soon. The luxury goods and fashion world would do well to heed the words of Henry Ford "failure is simply the opportunity to begin again, this time more intelligently".

[Back to news]