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Turbulence hits luxury sector

The downturn in the luxury sector is prompting unprecedented movement at executive level, with more predicted

The parting of chief executive Kim Winser (pictured) from Aquascutum following a failed management buyout last week and, as Drapers went to press, Versace chief executive Giancarlo Di Risio’s expected resignation after a rumoured strategy clash with creative director Donatella Versace, came hot on the heels of other high-profile departures in the sector.

Since the start of the year Marco Franchini, chief executive of footwear and accessories brand Bally, has stepped down, as has Prada’s chief operating officer and commercial director Brian Blake, and Didier Bonnin resigned as chief executive of footwear label Sergio Rossi, part of the Gucci Group. Roberto Cavalli is also looking for a chief executive.

Market experts said they expected further movement over the coming months as the financial downturn coupled with postponed sales of and flotations of luxury brands added to management unrest.

At Versace, consultants Bain & Company were drafted in to implement a cost-cutting drive. Di Risio is said to have disagreed with the suggestions, but the Versace family, which owns 100% of the shares, approved them amid concerns that the global luxury market will contract by 10% this year.

Bernstein analyst Luca Solca said: “I think [more] management churn is likely as firms fail to reach their goals in the midst of the slowdown. Managers can pay the price for this; sometimes rightly so.”

The difficulties faced by managers operating in family-owned businesses like Versace seem to be playing a large part in the upheavals.

One head of a luxury business said: “Versace is having a difficult time and because the family owns 100% of the shares there are no external influences. Lots of ‘non-family’ chief executives are leaving family-owned firms because planned flotations are not going ahead and wholesale sales are going pear-shaped.”

However, Mathew Dixon, director of recruitment firm Hudson Walker, said: “There is an argument that companies started by entrepreneurs rather than external chief executives have shown greater prudence and grown brands in a more cautious way because it’s their money being spent.”

Some experts believe this series of management-level changes does not mark the beginning of a crisis in the luxury sector, but is a natural evolution. Luxury fashion consultant David Jones said: “These changes may make it look like the luxury labels are in trouble, but in a recession there will always be unrest.”
Since Winser’s exit she has been linked to the Versace role and the top job at Marks & Spencer.

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