Versace, the Italian fashion house, is to slash one quarter of its workforce, in the latest sign that the recession is hitting the world's wealthy.

The fashion house, renowned for its garish and daring designs, announced today that it plans to cut 350 jobs worldwide by the middle of next year.

The cuts, which it blamed on the slowdown in spending following the recession, follow a review of the stores and its capital structure instigated by its recently appointed chief executive, Gian Giacomo Ferraris, the former boss of the Jil Sander Group who was also previously the managing director of the ready-to-wear division of Gucci Group.

The group, which employs 1,360 staff across its stores, head office and within its in-house manufacturing division, has called in management consultants to assess potential reductions.

The cuts, which come ahead of an expected operating loss this year of €30 million (£27 million), will be complete by the middle of next year.

In a statement, the group said that it was preparing a "comprehensive corporate reorganisation designed to increase efficiency, return the group to profitability in 2011 and ensure its future growth prospects".

The shake-up, it said, will see it "rationalise production facilities, review the store network, reduce capital investment in 2010 and cut overhead costs".

The changes will result "in a reduction in the worldwide workforce of approximately 350 positions".

Mr Giacomo Ferraris, said: "Trading conditions in the wake of the global financial crisis have been severe and the company expects to make a loss in 2009. No organisation can allow a situation like this to continue."

When the slump started luxury goods makers had initially looked resilient. But as recession set in, a number of big brands have struggled.

In January, Richemont, the Swiss jewellery and watchmaker, whose brands include Cartier and Montblanc, revealed that American consumers were turning their backs on the group.

Sales in the Americas, where the United States accounts for the bulk of purchases, fell by 28 per cent in the final three months of last year, it said.

Also in January Bang & Olufsen, the Danish maker of designer television and hi-fi systems, dismissed its chief executive after reporting a 37 per cent fall in first half pre-tax profits.

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