LVMH sells fashion label DKNY to G-III Apparel Group for $650m

LVMH-owned Donna Karan International is to be sold to G-III Apparel Group for $650m. The sale, which is expected to close in late 2016 or early 2017, comes just over a year after Donna Karen retired from her signature house and LVMH announced a bold new strategy for the company.

“DKNY has been restructuring since its founder Donna Karan stepped down from the business last year. The fact that it has needed to undergo a restructuring process suggest that its performance has been subpar, so this news does not come as a total surprise,” says Petah Marian, WGSN Senior Editor of Retail Intelligence.

The French luxury goods group suspended the high-end line, Donna Karan, to focus on the brand’s lower-priced contemporary collection DKNY, that accounted for 80% of sales and which has been designed by Public School’s Maxwell Osborne and Dao-Yi Chow. Both designers, as well as chief executive Caroline Brown, will remain with the brand through the transition, according to an LVMH spokeswoman.

This is big news for LVMH, which doesn’t usually sell its fashion brands – Christian Lacroix over 10 years ago was the last time it did so. But since the higher-end line was dropped, the remaining younger, more casual US-based DKNY line didn’t sit quite so easily in the ultra-luxury LVMH portfolio.

G-III chief executive Morris Goldfarb called the purchase “a significant market opportunity” adding to the licensing and manufacturing giant’s portfolio that includes Andrew Marc, Vilebrequin and Bass and holds the licenses for Calvin Klein, Tommy Hilfiger and Ivanka Trump, among others.

Goldfarb said: “Donna Karan brings increased scale and diversification, while providing incremental growth on top of our portfolio of some of the best fashion brands in the world. We believe we are well positioned to create and sustain additional value for our shareholders, partners, and customers.”

LVMH group MD Toni Belloni said: “We believe the DKNY brand has a dynamic position in the market, and when G-III approached us about acquiring the brand, we concluded that the time was right and that G-III was the right steward going forward.”

He noted G-III “has the expertise and capabilities to broaden the brand’s distribution and take it to its next level of success.”

G-III said it plans to fund the acquisition through new indebtedness, $75m of newly issued G-III common stock to LVMH and a $75m 6.5 year seller note. It also said it has obtained financing commitments from Barclays and JP Morgan Chase Bank for a $525m ABL credit facility and a $450m six-year term loan.

Speaking about the news, WGSN’s Head of Catwalks Lizzy Bowring said: “I understand the change of ownership and feel encouraged for the future growth of DKNY. DKNY that has been a pioneer of contemporary fashion, and along with the investment of G-111 Apparel feel that this is a viable venture. It also means that we can look forward to  DKNY…. as Calvin Klein…remaining within the fashion establishment. It would be a terrible loss if it disappeared. It will also mean that the Donna Karen legacy will live on. “

LVMH’s share price reacted well to the news, jumping 1.4% on the back of the news today to reach €144.35 per share.

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