Donna Karan, DKNY labels sold to Calvin Klein owner after sales disappoint

French giant LVMH gives up on label that once defined workplace attire but which has languished since its eponymous founder stepped down as chief designer to work on new projects

PUBLISHED : Tuesday, 26 July, 2016, 1:02pm
UPDATED : Tuesday, 26 July, 2016, 1:02pm

LVMH has sold Donna Karan International to G-III Apparel Group for US$650 million, a rare disposal for the French luxury-goods maker, which failed to turn around a label that once defined workplace attire for successful women.

The sale reflects LVMH’s inability to generate profitable growth from the business, which has counted Hillary Clinton and Michelle Obama among its fans. Co-founder Donna Karan transformed professional women’s wardrobes in the 1980s and ’90s with her design philosophy of “seven easy pieces” that could be mixed and matched, but the spread of casual workplace dressing has proved a challenge.

“When G-III approached us about acquiring the brand, we concluded that the time was right,” Toni Belloni, managing director of LVMH, said.

G-III makes dresses, suits and sportswear under brands such as Calvin Klein and Vince Camuto. G-III will gain the Donna Karan and DKNY brands, the companies said.

Selling DKNY is a way to get rid of a problem at a time when the market is tough
Luca Solca

LVMH shelved the Donna Karan line after its founder departed last year, with plans to focus on the DKNY brand, the New York Post reported on July 20. It also said that the company had decided to sell both brands after seven months of “disappointing performance” under new designers Maxwell Osborne and Dao-Yi Chow.

“Selling DKNY is a way to get rid of a problem at a time when the market is tough,” wrote Luca Solca, an analyst at Exane BNP Paribas. “Getting rid of loss-making businesses is second best to turning them around, but better than keeping them in the group as a perpetual drag.”

Shares of the French company rose 1.3 per cent to 144.20 in Paris. G-III fell 5.1 per cent to US$47.62, a sign its investors have concerns about acquiring the troubled brand.

Donna Karan founded the fashion label in 1984 with her late husband, Stephan Weiss. She stepped down as chief designer last year to focus on other projects such as Urban Zen.

The sale was “a good deal for LVMH, considering the brand has been under considerable pressure, not only in the US but in Europe over the past 12 to 18 months”, said John Guy, an analyst at MainFirst Bank. 

LVMH CEO Bernard Arnault’s mantra is there’s no such thing as a bad brand, just bad brand managers, according to the analyst. The few divestments LVMH has made in past years have been Ebel watches and Christian Lacroix fashion.

G-III said it expects the acquisition to weigh on profit in the financial year to January 2018, and boost earnings from then on. The New York-based company is taking on debt to fund the purchase.