Donatella Versace is the firm's chief designer and co-owner
Italian fashion house Versace is cutting a quarter of its workforce, blaming a slump in demand for luxury goods and designer items.
The 350 job losses are part of a reorganisation plan aimed at returning the group to profitability in 2011.
Versace, which also wants to streamline production and review its store network, will implement the measures by the middle of next year.
Earlier this year, the group reported its first-quarter sales were down 13%.
The fashion brand, whose clothes are worn by celebrities such as Angelina Jolie and Madonna, also wants to reduce capital investment and cut overheads.
In a statement, the company said it had been damaged by the current economic climate.
"Trading conditions in the wake of the global financial crisis have been severe and the company expects to make a loss in 2009," says chief executive Gian Giacomo Ferraris.
Earlier this month, Versace announced it was pulling out of the Japanese market after nearly 30 years.
In the past three years Versace has opened about 20 stores in China and one in Dubai.
By January 2010, it plans to have new stores in New Delhi, Australia and Las Vegas.