How clothes brought down Christian Lacroix

When Christian Lacroix launched his haute couture fashion label in 1987, the stock market was just months from crashing. Now, 22 years later, the creative flamboyance of the man who invented "le pouf" is once again being thwarted by the constraints of commercial viability. Yesterday, the fashion house filed for voluntary bankruptcy.

While Lacroix's exuberant designs, worn on the red carpet by Helen Mirren, Kirsten Dunst and Natalie Portman, have secured his position as one of France's most loved couturiers, the fashion label, which posted €10m (£8.7m) losses last year, has never once turned a profit.

The already precarious finances have been further undermined by the downturn in the luxury market, with sales of autumn's ready-to-wear collection down 35 per cent on last year. Even that enduring classic, the 'pouf' miniature puffball skirt, has not been able to bolster the bottom line.

Now the French commercial courts will decide whether to restructure the company, or liquidate it. A spokesperson for Lacroix said that the decision is expected in the next week.

When Christian Lacroix founded his label, in concert with Louis Vuitton (LVMH) chief executive Bernard Arnaut, the outlook was very different. Lacroix, now 58, had shone at Hèrmes and the fashion house of Jean Patou, and he quickly made a global impact in his own right for his extravagant designs.

The designer's cultural significance only grew, to the extent that he was soon name-checked as Edina's favourite designer in the cult British sitcom Absolutely Fabulous. In 2002, Lacroix received the Chevalier de la Legion d'Honneur for services to fashion. He even designed the décor for France's TGVs and uniforms for Air France.

But financial viability remained a pipe dream. In 2005, still making a loss, LVMH sold the company to the US-based Falic Group. The new owners invested heavily in the haute couture side of the business, in an effort to boost revenue, and expanded in the US. None of it did any good.

For the last year, Falic has been trying to sell a stake in the company or find a partner. According to Nicolas Topiol, chief executive of Lacroix, discussions were in "the final phase" but were "directly hit by the conditions of the financial markets".

Lacroix is just one of many luxury brands suffering in the recession. LVMH, the world's largest luxury goods company, recently cancelled a plan to open a flagship Louis Vuitton store in Tokyo, while Chanel recently announced that 200 temporary staff would lose their jobs. At Versace, revenues fell 13.4 per cent in the first quarter of this year.

But despite the "hurt" of the financial crisis, hopes were still running high at Lacroix yesterday that this would not be the end. Sources at the fashion house said that the label is still seeking a buyer. Lacroix himself is contractually obliged to work there until next year. And shareholders, who want to keep the fashion house afloat, have said they will present a rescue plan to the court, although this is expected to mean job losses. Yesterday, a spokesperson for Lacroix said: "Regrettably, I cannot yet confirm if the July show will be going ahead."