UPDATE 1-Italy fashion house Cavalli stake sale collapses

(Recasts, adds details)

By Eleanor Wason/Jo Winterbottom

LONDON/MILAN, July 8 (Reuters) - Italian fashion house Roberto Cavalli's stake sale has been put on hold amid uncertain times for luxury goods, designer Roberto Cavalli and sources close to potential buyers said on Tuesday.

Cavalli told Italian business newspaper Il Sole 24 Ore he decided not to sell because prices have fallen during the financial market crisis.

Cavalli's setback does not bode well for rival luxury goods firms Prada and Ferragamo, both looking to sell shares to the public this year.

"We haven't reached the right moment yet for (a sale to private equity firms). At the same time, as I have said a thousand times, we don't need (to sell)," Cavalli said, in comments confirmed to Reuters by a spokeswoman.

Sources close to potential buyers said the credit crunch and signs of a slowdown in luxury goods spending had blunted private equity interest in the company.

"Everybody withdrew because trading was heading south during the sale process," one source familiar with the bidding said.

The auction initially drew an array of potential bidders, including buyout giants Blackstone [BG.UL] and TPG [TPG.UL], drawn by the company's potential in emerging markets.