June 5 (Bloomberg) -- Gianni Versace SpA said Chief Executive Officer Giancarlo di Risio agreed to leave the luxury label by mutual consent, ending two weeks of speculation that his departure was imminent after clashes with Donatella Versace.

Gianni Versace and di Risio, who ran the brand for almost five years, reached “the mutual decision” to end their relationship, the fashion company said, adding that the CEO will stay temporarily “to guarantee a smooth transitional period.”

Three people familiar with the situation said last week that Versace’s board was considering firing di Risio, 53, after tensions over cost cuts and creative control flared with Donatella, the head designer and owner of a 20 percent stake.

The family brought in the former Fendi SpA chief in 2004 to stem losses. He worked closely with Donatella to make the collections less flashy and returned the label to profit, helped by sales of accessories and new booming markets, such as Russia.

Donatella’s 22-year-old daughter Allegra inherited a 50 percent stake in Versace after her uncle Gianni Versace’s 1997 murder. A further 30 percent stake is held by Donatella’s uncle, 64-year-old Santo Versace, now an Italian politician.

Di Risio returned Versace to profit in 2005, a year ahead of schedule, by selling money-losing eyewear and fragrance units and taking more control of Asian distribution. That enabled the family to take their first dividends in at least four years.

Deteriorating Relationship

The relationship later deteriorated, and the conflict between Di Risio and Donatella Versace was first made public by the newspaper Il Sole 24 Ore in a May 21 article.

The people familiar with the situation told Bloomberg that the family criticized Di Risio for not reducing new store plans, while for his part, the CEO was recently unhappy that Donatella’s choice of photographer for an ad campaign was Mario Testino, who charges at least 100,000 euros ($140,000) a day.

Donatella had also been displeased that Di Risio sidestepped her to license a cheaper line of handbags designed by someone else, one of the people said.

Di Risio said in February, when he signed the agreement to produce a bag collection designed by Briton Christopher Kane under the cheaper Versus label, that the move was necessary in the current market because accessible luxury goods “have a greater grip.” Versus handbags sell for about 800 euros, while Versace-brand purses cost more than 2,000 euros.

Versace has 81 boutiques for its top Gianni Versace label, while the Versace Jeans, Sport and Versus collections have 56 freestanding stores, the company Web site shows. Di Risio had been concentrating on building stores in Asia, which he had said would become Versace’s No. 2 market this year.

The company stayed profitable in 2008 and said last week that it made money in the first quarter, though the label is under pressure from the financial crisis. Bain & Co. predicts the luxury market may shrink 10 percent this year.

Versace dressed celebrities including Angelina Jolie and Lenny Kravitz at last month’s Cannes film festival. Even when the label lost money, Donatella built on relationships her brother had with show business figures such as Elton John to keep the brand in the public eye.

To contact the reporters on this story: Dan Liefgreen in Milan at dliefgreen@bloomberg.net; Sara Gay Forden in Milan at sforden@bloomberg.net

Last Updated: June 5, 2009 13:42 EDT