By Suzanne Kapner

Donatella Versace's decision to step aside as the creative director of the fashion house she inherited followed tensions between the Italian designer and the U.S. corporate chief who was trying to pump up sales by toning down her designs.

On Thursday, the company said Donatella, 69 years old, would be replaced after nearly three decades and just weeks after showing her latest vibrant designs on a Milan runway. The change comes as her American boss, John Idol, is exploring a potential sale of Versace. Italian rival Prada is interested, people familiar with the situation said.

Idol, a businessman who had built Michael Kors into a global brand, took over family-run Versace in a more than $2 billion deal in 2018. It was the centerpiece of his ambition to turn the company he runs, Capri Holdings, into a U.S. fashion conglomerate on par with European luxury houses. Idol told investors that Versace would more than double its annual revenue.

"The brand has a much bigger name than its annual sales," Idol said during an interview when he took it over. "That creates a huge potential for us."

The relationship, like so many American attempts to capture European high fashion, has frayed. When he bought Versace, Idol praised the Italian luxury house, saying it was synonymous with glamour and style. It didn't take long for some Versace executives to describe their new U.S. boss in less flattering terms, calling him the "American cowboy" for his rough-riding ways.

The brand isn't for everyone. Versace is known for its bright colors, bold Borocco printed silks and va-va-voom gowns, such as the green "jungle" dress with the navel-plunging neckline that Jennifer Lopez wore to the 2000 Grammy Awards. To appeal to a wider audience, Idol wanted the brand to tone down its signature looks, focus more on craftsmanship and add more elegant styles.

He wanted clothes that were more Palm Beach than South Beach, people familiar with the situation said. His ideas often clashed with those of Donatella, who as creative director had defined the brand's looks since her brother Gianni's 1997 murder.

Those flashy silk shorts

From his Manhattan office and during frequent trips to Milan, the Capri chief weighed in on details large and small. He issued directives to remove men's silk shorts from mannequins in Versace store windows, saying the look was too flamboyant. He looked for alternatives to its signature Medusa logo.

Idol pushed Versace to create a monogram similar to Michael Kors's "MK", Louis Vuitton's "LV" and Chanel's interlocking "C's." The design team came up with the Baroque V. And Versace expanded its use of a Greca pattern to adorn everything from handbags to coats, shirts and dresses. To elevate the brand, Versace raised prices.

Donatella respected Idol's business acumen but felt he undermined her design authority. She shied away from direct confrontation and would excuse herself from meetings, some of the people said. She tried to deliver what the Capri chief wanted, but when some of his ideas fell flat with customers, she would revert to more traditional Versace looks. The outcome was a series of flip-flops that created confusion about what the brand stands for.

Speaking at a Vogue event in February the day before her latest fashion show, Donatella said: "Being told what to do, being told what's going to sell...If you try to please too many people, too many managers, creativity is gone."

The show was her last. On Thursday, Idol said he had hired Dario Vitale from Miu Miu to take over as Versace's creative director. Donatella will become chief brand ambassador.

"Versace is in my DNA and always in my heart," Donatella said in a written statement.

With sales of luxury goods slowing, European fashion houses are switching up their design talent. On Thursday, Gucci tapped Balenciaga's artistic director as its next creative chief.

Sales of Versace have slumped recently, and Capri's market valuation has fallen by more than half since the Versace deal closed. The entire company, including Michael Kors and the Jimmy Choo shoe brand, is now valued at roughly $2.3 billion -- only slightly more than what Capri paid for Versace.

Idol told The Wall Street Journal on Thursday that he was confident in the vision he has set for Versace. "Our refined focus on luxury and craftsmanship is resonating with our consumers," he said. "We recognize that brand evolutions take time and that challenges are inevitable along the path to success."

'A party girl image'

Donatella had planned to become a teacher but instead joined her older brother when he founded the fashion house in 1978. She was his creative foil and oversaw Versus, a more affordable collection aimed at younger consumers.

She helped build the brand's profile by cultivating relationships with celebrities and magazine editors. Her signature platinum blond hair and heavy black eyeliner made her as recognizable as some of Versace's famous clientele.

After Gianni was shot to death on the steps of his Miami Beach mansion in 1997, Donatella assumed the creative helm. She struggled at first to find her footing and battled drug addiction. "I have a party girl image, but I'm a hard worker," Donatella told the Journal in 2003. She eventually got clean in rehab.

She went on to create some of the brand's most iconic looks, brought a sense of female empowerment to Versace and kept it relevant by featuring Madonna, Lady Gaga and Beyoncé in ad campaigns.

Versace's finances were less glamorous. It was a small competitor in a world dominated by giants such as LVMH and Kering. To plug operating losses, the family sold Picasso paintings, the Miami mansion and boutique leases. It stayed under the family's control until Capri came calling.

Not for sale

When Donatella first met Idol in early 2018, the family business wasn't for sale. "I wasn't thinking about selling but I talked to John," she said at the time. She left a dinner in Milan persuaded that Idol could bring management expertise, especially in online sales and expanding the store footprint.

At first, the acquisition by Capri looked like a sweetheart marriage. Versace executives were excited by the prospect of a deep-pocketed parent bankrolling an expansion.

Although some had criticized Idol for cheapening Michael Kors by splashing its logo across products and opening too many stores, Idol insisted that Versace was different. He discontinued the lower-priced Versus line to court higher-end customers. "We will focus on the luxury part of Versace," he said in 2018.

An early warning came soon after the deal closed, when Capri executives peppered meetings with American jargon. Designers would try to communicate their inspiration for the latest collection, and managers would ask about key performance indicators, or KPIs -- a term that the designers weren't familiar with, some of the people said.

During the Covid pandemic, Versace sales exploded when shoppers snapped up luxury goods while they were stuck at home. But its flashy looks soon ran headlong into the quiet-luxury trend that was gaining popularity, making it look out of step.

By the Fall/Winter 2021 fashion show, a new Versace look was on display. Models took to the catwalk in shades of black and brown. Handbags and clothes were covered in the Greca pattern. "You don't come to Versace to wear brown," one reviewer said at the time.

New boss in charge

Donatella bristled at Idol's interference, particularly because he had no training in design.

Idol held senior business roles at Ralph Lauren before becoming chief executive of Donna Karan in 1997. In 2003, he teamed with investors to buy Michael Kors and worked closely with its eponymous designer to turn it into a brand with $4.7 billion in sales at its peak in the fiscal year that ended in April 2016.

Those sales were falling when he agreed to buy Versace and change the name of the company to Capri -- after the chic Italian island.

The dealmaking continued in 2023 when Idol agreed to sell the company for $8.5 billion to Coach owner Tapestry. As he fought an unsuccessful antitrust battle to close the Tapestry deal, Idol was also pushing his vision for Versace.

For the Fall/Winter 2023 runway show, models in black suits sashayed down the runway atop the Pacific Design Center's parking garage in Los Angeles. There was hardly a print in sight. Idol touted the show as a success, telling analysts that it marked the full repositioning of Versace's women's clothing.

Fashion insiders and consumers had a different take. On social media, some said Versace was copying Balenciaga. Others complained about too much black and an Audrey Hepburn vibe.

The brand's existing customers revolted, and it didn't attract enough new ones. For the nine months through Dec. 28, Versace sales dropped nearly 20% to $613 million.

On a February call with analysts, Idol said he was pleased with aspects of Versace's repositioning, including a reduction in markdowns, but added that mistakes were made. "While elevating the assortment, we removed too many unique Versace statement items," he said.

The brand is introducing more items at less expensive prices, such as the $1,190 Tag Bag and $550 Galaxia sneaker.

Versace looked more like itself during its fashion show in Milan in late February. There was an abundance of beading, leopard prints and bright colors, including a long coral coat lined in gold and turquoise silk.

"With this collection, I am not following any rules," Donatella wrote on Instagram. "Only the rules of the Versace DNA."

Write to Suzanne Kapner at suzanne.kapner@wsj.com

(END) Dow Jones Newswires

March 13, 2025 19:11 ET (23:11 GMT)

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