Emanuel Ungaro has signed a licence deal with Italian fashion group Aeffe, becoming the latest fashion brand to throw in the towel on developing its ready-to-wear business directly after having failed to reach a critical size in terms of sales.

Ungaro opted for the leaner, less capital-intensive licence model, walking in the footsteps of fellow fashion companies such as Christian Lacroix, which was reduced to a small licence operation after looking for a buyer in vain for years.

Aeffe signed a global licence contract with Ungaro - known originally for its exotic patterns and for draped, comfortable and elegant suits - to manufacture, manage and distribute the French brand's women's clothing and accessories.

The Italian company also gets an option to take a stake in Ungaro if sales targets are met.

Ungaro, which has suffered years of losses and repeated changes in management and artistic direction, will sit alongside other licensed brands at Aeffe such as Alberta Ferretti, Moschino, Cacharel and Jean-Paul Gaultier.

"For us, relying on a licence partner like Aeffe gives us a strength which we would not have if we continued operating the ready-to-wear business directly," Marie Fournier, managing director at Emanuel Ungaro, told Reuters.

Fournier declined to comment on the precise timeline of the licence deal or the size of the stake Aeffe would acquire for free if the Italian distributor met revenue targets for Ungaro's womenswear and accessories.

As part of the brand's relaunch, Aeffe has appointed Sicilian designer Fausto Puglisi as the brand's new creative director, the seventh designer to work for Ungaro since the brand's founding designer retired in 2004.

Puglisi succeeds Giambattista Valli, Vincent Dare, Peter Dundas, Esteban Cortazar, Giles Deacon and Estrella Archs, who worked alongside actress Lindsay Lohan for one season.

Puglisi will present his first collection for Ungaro at Paris Fashion Week in March.

In December, Emanuel Ungaro lost its Chief Executive Jeffry Aronsson less than six months after he arrived to turn around the loss-making label. His contract was not renewed, raising questions at the time about Ungaro's future.

Ungaro belongs to Asim Abdullah, a Sillicon Valley entrepreneur who acquired the fashion brand in 2005 and is the company's chairman.

Fournier said Ungaro had completed a restructuring, cutting staff from several dozens to nine, which meant the brand would finally be profitable this year. "We will make profits from the revenues from our licences," Fournier said.

Ungaro has licence agreements for menswear with several companies in Asia as well as a perfume licence with Salvatore Ferragamo in Italy. (Editing by David Holmes)