Donatella Versace

Donatella Versace’s decision to enter drug rehab isn’t expected to have a major impact on the Versace company or its plans to seek an investor.

MILAN — Donatella Versace’s decision to enter rehab for drug-related issues isn’t likely to have a major impact on the company that bears her family’s name or its plans to seek a minority investor, according to industry observers.

A Versace spokesman confirmed a report in Wednesday’s New York Post that the designer entered a rehab center last month for substance abuse, but declined to say where.

“This is a private matter and we hope the press respects it as such. It’s business as usual and we look forward to presenting the spring-summer 2005 collection in Milan on Oct. 2,” he said.

The Versace brand has been built on rock ‘n’ roll and glitz, and Donatella Versace has epitomized that image as much as anyone, mingling with celebrities such as Madonna, Jennifer Lopez, Beyoncé Knowles, Britney Spears and Christina Aguilera and partying in almost every major city around the globe. Known for not crossing the threshold of the Via Gesú palace, the company’s Milan headquarters, until the lunch hour, her high-living style has become so renowned that “Saturday Night Live” turned it into a running comic gag, starring Maya Rudolph as the designer.

And fashion and drugs have long been linked, from the days of Halston through to Calvin Klein’s substance abuse problems. Calvin Klein’s former chairman Barry Schwartz, who is now chairman of the New York Racing Association, said Wednesday, “Obviously the first step to solving a problem is recognizing it. The good thing is she’s getting treatment. It will probably make her a better executive because she will be able to function a little bit more.

“We went through a difficult time but certainly Calvin came back and stronger than ever,” Schwartz said.

Schwartz also noted rehab is often a 30- to 40-day treatment, which isn’t a great amount of time in the grand scheme of things, especially in large well-staffed organizations. “I’m sure she’s got capable people working in the business. Everyone will pull that much harder to cover for her until she comes back.”

Still, Versace’s decision to check into rehab comes as the company remains in turnaround mode and shortly after a new shareholding structure took effect. Donatella’s daughter Allegra Versace Beck turned 18 on June 30 and gained control of the 50 percent stake in the house left to her by her late uncle Gianni Versace, who was murdered in Miami Beach in 1997. The remaining 50 percent is split between Donatella, who owns 20 percent, and her brother Santo, who owns the remaining 30 percent.

This story first appeared in the July 29, 2004 issue of WWD. Subscribe Today.

The spokesman confirmed Wednesday that Versace is still seeking a minority investor in the house; it has hired Credit Suisse First Boston and Lazard to help conduct the search. The spinoff of Giver, Versace’s fragrance division, is also imminent. A source confirmed the company would like to emulate the previous long-term licensing formula with Luxottica for eyewear, to infuse cash to improve the debt-equity ratio. Giver’s most likely suitor is Inter Parfums.

Observers said some potential investors in the house could become nervous with the news of Donatella Versace’s substance abuse, but most believe it won’t have any long-term impact on the process.

Jeffrey Kalinsky, owner of Jeffrey stores, said, “If Donatella felt she needed to go somewhere to get help for a problem, that’s great for business and that’s great for Donatella. That’s a decision of strength and courage. The greatest thing about getting help is knowing you need to.”

He also noted that many accomplished people have sought treatment.

“She certainly isn’t the first person in the fashion industry or in any industry — doctors, lawyers, movie stars — who has needed some help,” Kalinsky said. “Certainly, there are tons of successful people who have been through similar things.”

Foxy Brown, who launches a signature fur collection this fall, wished Versace “a speedy recovery” and noted how the pressures of this industry have made several falter. She pointed to Mary-Kate Olsen and her “all-time favorite” Courtney Love as examples of celebrities who have sought treatment in recent months. But Brown doesn’t expect Versace’s entering rehab to have much bearing on business and said it might even help it.

“It makes her more human in a sick way [in consumers’ eyes],” Brown said. “Before if she was ever seen as untouchable, now people will see she suffers like the rest of us.”

Joan Kaner, senior vice president and fashion director for Neiman Marcus, said the shakeout remains to be seen, but presumed the upcoming collection has been put to bed. She did speculate about how much has been done for production of the runway show and other necessities.

Kenneth A. Wasik, director of the Consumer Products Group of Houlihan Lokey Howard and Zukin, said potential investors will likely be focusing more on the product than the personalities. “It’s a hiccup, but overall the value is still there. People buying don’t know her other than what they read in the paper,” he said, adding that in the end, he thinks the Versace name will overcome any bad press. “Luxury designer goods are in such high demand, that probably eclipses any damage done by her.”

The impact would be significantly greater if Donatella were at the helm of a fashion house with a more mainstream style sensibility, marketing sources said.

“I don’t think it will make a bit of difference — the [Versace] brand is much bigger than Donatella Versace,” said Drew Neisser, president and chief executive officer of Renegade Marketing Group. “The brand is not built on Middle American values. This isn’t Disney or a brand that built itself on some kind of social consciousness,” he added. “[Consumers will] forgive her. They’ll probably celebrate her renewal.”

In addition, brand image guru Marc Gobe observed it would be surprising — and ironic — if a leading-edge fashion label such as Versace saw its brand equity diminish because of Donatella’s rehab, considering so much apparel has been marketed via models portraying a heroin chic.

Versace was among a trio of European designer labels that entered women’s top 10 favorite apparel brands in the Brand Keys third annual fashion index this June. Versace ranked fifth, selected by 16 percent of women, as did Chanel and Louis Vuitton.

Brand Keys president Robert Passikoff said Versace’s recovery period “degrades only a small degree of a brand’s strength. People expect that from designers and rock stars. It’s not the same as a senator doing that — not as deleterious in the world of designers and rock stars.”

Not surprisingly, Passikoff projected any impact wielded by Donatella’s presence in rehab on the sale of a minority stake in the house of Versace would be very minor. “People buying into such ventures know what is and is not involved,” he noted.

— Alessandra Ilari, with contributions from Rosemary Feitelberg and Valerie Seckler, New York