Backstage at a Versace fashion show in Milan last June was surprisingly empty and quiet compared to far more extravagant events a decade ago -- a reflection of the fall of one of the world's premiere clothing labels. A report in the Nov. 16 issue of Newsweek magazine details how the empire built by Gianni Versace has collapsed since the fashion guru was shot to death in 1997.

After the murder Gianni's brother Santo took over as the company's CEO and his sister Donatella as creative director. But Versace has suffered -- its sales have plunged from nearly US$1 billion in 1996 to less than half that now.

Critics blame the demise of the brand on Donatella's misjudgments. She and Gianni had heated arguments over design, and after his death she attempted a complete overhaul of the fundamentals of the brand that her older brother had established. She laid off older experts and hired young designers. She put aside Gianni's collections, and "changed the Versace design voice. For men, it went from sleek, well-cut suits to a more casual silhouette; for women, Gianni's signature sexy chic in bold tones gave way to something far more conservative and girlish, in a pastel palette," Newsweek wrote.

Donatella's erratic decisions turned off customers and retailers alike, the article said, and her indulgent lifestyle added further pressure on the company. Giancarlo di Risio, who was hired as Versace's CEO five years ago, briefly returned the company to the black within 18 months of his appointment, but abruptly left the job in June. Sources say he quit after a restructuring plan that cut Donatella's spending was rejected.

Recently the company fired 350 employees as part of a program to get back on track by 2011. But "many in the fashion industry believe it's time for the brand to continue without Versace family involvement," Newsweek wrote.

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