MILAN — Versace’s shareholders’ meeting here Monday to approve year-end results that included a net loss of $32.6 million marked two more pivotal moments in the history of the fashion house: the debut of Allegra Versace Beck as its major shareholder and the repayment of its $123 million bond.

But Beck’s arrival offered a slight twist — while her mother Donatella and her uncle Santo voted to sign off on the numbers, the 18-year-old Beck abstained. But Beck’s abstention meant her vote did not register and as a result the accounts still were approved, since Donatella Versace owns 30 percent of the firm and Santo Versace 20 percent.

This story first appeared in the July 7, 2004 issue of WWD. Subscribe Today.

The results showed there is still a lot of work to be done in sorting out the house of Versace. The company reported that net losses ballooned in 2003 to 26.5 million euros, or $32.6 million at current exchange, compared with a loss of 5.8 million euros, or $7.1 million, in 2002. Sales fell 12 percent to 403 million euros, or $495.7 million, from 483 million euros, or $594.5 million, in 2002. Sales were hit by the appreciation of the euro, the impact of SARS and the Iraqi war.

“Versace is one of the most important and well-known world brands in the luxury sector and we are engaged in growing it and developing it,” Santo and Donatella Versace, the respective chairman and creative director of the company, and Beck said in a joint statement. “Now, with the timely reimbursement of the bond, the group can dedicate itself entirely to the completion of strategies and long-term plans that shareholders share for the future of the company.”

This is the first time a statement by the company includes Beck. Also a first, Beck took part in the shareholders’ meeting on Monday. Beck took control of her 50 percent stake in the company, inherited from her late uncle Gianni Versace, upon her 18th birthday on June 30.

While Versace officials have said Beck will have little day-to-day involvement in the company, instead preferring to focus on her upcoming university studies in the U.S., her abstention on Monday indicates she is taking seriously her new responsibilities as Versace’s largest single shareholder.

“It is her right to abstain from the voting,” said Daniele Ballestrazzi, Versace’s interim chief executive officer, in a phone interview. “She needs time to understand the figures.”

Beck has appointed Michele Carpinelli, a lawyer with Studio Chiomenti, as her legal adviser. Carpinelli also was present at the shareholders’ meeting. “Carpinelli was nominated on June 30. He, too, needs time to familiarize himself with the company and the figures,” said a Versace spokesman.

A Milan-based analyst said Beck’s abstention can be interpreted in two different ways: “On the one hand, it could be seen as a way to distance herself from her mother and her uncle; on the other, it shows that she wants to have a hands-on, full grasp of the company’s structure and it is a signal that Beck is ready to decide with her own head.”

Another analyst agreed that Beck needed more time to analyze the balance sheets. “This proves that she is very cautious,” noting, however, that the abstention also “allows her to eventually veto the balance sheet, if she were to be in disaccord with any detail listed on the sheet.”

Ballestrazzi said that “a return to profitability is expected for 2004,” and that 2005 would reflect the strategies put in motion over the past six to 12 months. Versace on Friday repaid the 100 million eurobond, or $123 million, issued by Morgan Stanley in 1999, which expired on July 5, through a financing of 120 million euros, or $147.7 million, by Banca Intesa, to be issued in three installments, he said.

Although no longer pressured by the repayment of the bond, the company spokesman said Versace is still looking for a partner that will invest in the house. “Credit Suisse First Boston and Lazard are actively looking at proposals and we will make a decision and will have executed a deal by the end of 2004. We remain interested in a financial partner,” said the spokesman.

As reported, a number of funds have expressed possible interest in a partnership, including Doughty Hanson and Apax Partners. However, another suitor, Matteo Corsini, disavowed claims he’d made that he was acting on behalf on the Dubai-based fund Istithmar group in approaching the Versaces about a possible deal. In a letter to WWD, Corsini — whose track record has been questioned by the Italian press — now claims he was acting on behalf of his own real estate company, Corsini real estate & investments ltd., in approaching the Versaces and not on the part of Istithmar.

Ballestrazzi said that a swing in the exchange rate affected sales. In addition, last year saw a reduction in contributions from nonrecurring revenues, such as the eyewear licensing agreement inked with Luxottica in 2002 which injected 25 million euros, or $30.7 million, into the company. “On a pro-forma basis, had we maintained the same average exchange of 2002, sales would have declined by 7 percent, rather than 12 percent,” he said. The gross margin dropped to 203 million euros, or $249.9 million, from 270 million euros, or $332.3 million, in 2002.

In the second half of 2003, the company reduced ordinary costs, ranging from promoting and advertising activities to external consulting, by 12 percent to 202 million euros, or $248.6 million, compared with 230 million euros, or $283.1 million, the previous year.

Cost cutting helped EBITDA be in line with the 39.8 million euros, or $48.9 million, in 2002, while operating results, after amortization and devaluation, dropped to a loss of 21 million euros, or $25.8 million, in 2003 compared with a profit of 13.4 million euros, or $16.6 million, in 2002. Reducing inventories and receivables, said Ballestrazzi, helped improve the company’s net financial debt, which stood at 117 million euros, or $144 million, at the end of 2003, down from 130 million euros, or $160 million, at the end of 2002.

Ballestrazzi said there were “no major changes in market shares” in 2003 compared with 2002. Italy and Europe account for about 60 percent of sales, the U.S. for 14 percent, the Far East, excluding Japan for 8 percent. Japan accounts for 4 percent of sales.

“Japan has the most potential, we are recovering share and strength there,” said Ballestrazzi.

Versace saw a 70 percent drop in sales in Asia, including Japan, in the first half of 2003, hit by the impact of SARS. “The Japanese market is driven by accessories, and we are still very strong in apparel, so we are working on the product, focusing on being competitive there and growing our accessories division in that market, which is very traditional.”

Ballestrazzi said the company has “been effective in delivering its accessories concept in Europe with a strong repositioning,” but that work still needs to be done in Japan. Accessories globally account for 8 percent of the company’s business. “It’s a division that is below what it should be,” he said.

The U.S. showed overall weakness, caused by the appreciation of the euro against the dollar. “We tried to contain a rise in prices, so that the currency fluctuations would not be passed on to the market,” said Ballestrazzi, noting the company had at times dropped prices by from 5 to 15 percent.

Ballestrazzi said Versace is completing the merger of Alias, which produces all apparel for the Versace and Versace Sport collections, among others, and Diver, which produces its leather goods and footwear. Alias and Diver will be merged into Versace SpA starting Sept. 1. “This is a way to simplify and centralize the company’s structure and avoid the bureaucratic side of intercorporate activities, a way to reorganize the workflow across rather than vertically,” said Ballestrazzi, noting that production was previously split among five different factories. The merger will be marked by the opening of a new state-of-the-art plant in Novara. Employees will be reallocated and not let go, he noted.

Ballestrazzi also said Versace was pleased with an “exceptional sell-through of the women’s collections for spring-summer 2004 — a 37 percent growth.” Orders for fall-winter 2004 also grew 20 percent.

“The results of a single, integrated collection, abandoning the concept of a pre- and main collection, and available two months ahead, will be fully evident in 2005,” he predicted.

— With contributions by Alessandra Ilari