(Clockwise from left) British model Sophie Dahl in a Versace outfit, Donatella Versace and Tom Ford

Welcome to the twin worlds of Versace. In the first, it still dresses the Hollywood A-list. And Donatella, the fashion house’s peroxide creative director, still rules divine.

When she isn’t jetting between fashion capitals and lakeside villas, she is presiding over yet more dazzling launches of her bustling emporia. Sales, they insist, are buoyant. “Donatella is taking the collection in a whole new direction, darling,” the PR girls trill. “We are opening lots of fabulous new shops...”

But beneath the veneer of statuesque beauties in acid-coloured gowns, towering hairdos and electric-blue eyeshadow, the sense of panic is palpable. Suddenly, it seems that Versace, purveyors of all that is ostentatious, has become shy of the spotlight. An omerta-style silence has descended on the house.

For months there have been rumours of frantic internal “restructuring”. Behind the doors of its head office consultants are said to have been appointed to rein in the damage caused by years of excess. And with the news that the top design team of Tom Ford and Domenico de Sole have left Gucci, the Italian label that they revolutionised, the fashion industry now waits to see where they will take their considerable talents.

The spotlight of speculation has fallen on Versace: some believe the house is in need of a “rescue mission”. In the fashion house’s slick PR operation the rumour is, of course, shrugged off. “I have denied the Tom Ford and Domenico de Sole thing at least 8,000 times,” says Jason Weisenfeld, its director of communications in Milan.

In the London office, the climate is more fraught: “I suggest you write a positive piece about how the house has moved on,” says a clearly rattled PR girl.

“And don’t write about the rumours of Tom Ford and Domenico de Sole. Don’t even mention them.... Oh, and Versace is definitely not for sale.... I also need to make sure no one has, by accident, told you something different so can you tell me what fashion editors are saying?”

Within the industry few are placated by Versace’s display of bravado. While the company flailingly tries to stem the poor publicity, Women’s Wear Daily, the fashion world’s bible, described it as the “famous but financially struggling fashion house”.

The Wall Street Journal went further when it pronounced that if Versace wanted to return to its dazzle of the 1990s it needed to “discover how to attract not only the people close to the fashion industry” but also the big department-store customers.

Magazine publishers have reported a drop in the house’s advertising, and losses have been forecast for 2003. Versace closed the doors on its Bond Street emporium at the end of 2002 — it had been opened since May 1992. More recently, the shutters were also pulled down on stores in New York and San Francisco. More are set to follow.

In addition, the company has been recommended to prune its 2,000-strong workforce. Next year’s advertising campaign, shot last week, will feature an unknown model in stark contrast to previous years: last year, the house paid singer Christina Aguilera to publicise the brand.

Earlier this year, Versace announced losses of £4.1 million for sales in 2002 over £5.1 million profits for 2001. Fabio Cacciatori, the company’s managing director, told the Wall Street Journal: “It’s true the core business has been weak and is not doing well. but we are trying to correct this.”

Along with others in the luxury goods area, the company blamed the loss on the fallout from September 11, Sars and currency fluctuations. Its operating profit dropped 27.6 per cent from £13 million to £10 million. Its net debt increased from £70 million to £90 million.

The overall debt of the private company has not been made public. However, Weisenfeld says: “I can tell we have exceeded our sales on next season’s collection already but I can’t say what those projections were. As a family-run company we only have to reveal figures annually.”