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Donna Karan to G-III Apparel Group
Donna Karan International Inc (DKNY) has been agreed to be sold by its parent company LMVH Moet Hennessy Louis Vuitton SE to G-III Apparel Group Ltd., the American apparel company, for $650 million, complete with the debt. The move was unlikely from the French luxury fashion firm.
Donna Karan has only experienced lackluster growth for many years, compounded by the restrained investment it was receiving from LVMH. The group was focusing more on brands such as Celine. Donna Karan and the associated DKNY brand were not considered brands with significant potential, and DKNY was facing quite stiff competition in the market.
LVMH believes that re-energizing DKNY would take time and would be better suited to G-III's goals and objectives. LVMH's brands usually sell at more premium prices than Donna Karan usually retails at. LVMH Chairman Pierre-Yves Roussel revealed that G-III expressed interest in purchasing Donna Karan at least six weeks back.
First Divestiture for LVMH Since 2005
So while all this sounds reasonable, it still is strange for the LVMH group since this is the first divestiture of a big LVMH brand since 2005, when Christian Lacroix was sold to the Falic Group. LVMH Founder Bernand Arnault had also fostered a reputation of holding on to the brands he purchased. The presence of DKNY in department stores probably did not please Arnault, whose company has premium brands such as Louis Vuitton in its arsenal, though Donna Karan was purchased for being one of the best known brands in the world.
DKNY Probably Wouldn't Have Fitted In
Founded by designer Donna Karan in 1984, the DKNY branded clothes, bags and shoes swiftly gained popularity and went public in 1996. It was purchased in 2002 by LVMH for around $243 million, as the group sought to take advantage of DKNY's popularity and ubiquity to revitalize it and bring in the benefits for the whole group. However, with Champagne brand Moet & Chandon and Hennessy, the cognac label, being two of the other premium brands in the LVMH group's arsenal, DKNY probably wouldn’t have fitted in though it did give the groupa foray into the ready-to-wear clothes business. It was also the first major designer label that was American for the Europe-based LVMH.
The deal is thought to close between late 2016 or early 2017. The DKNY sale now raises questions as to whether LVMH could be looking to sell other brands under its umbrella such as the underperforming Marc Jacobs.
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