G-III snaps up Donna Karan from LVMH for $650m

Dive Brief:

G-III Apparel Group, Ltd. and LVMH Moët Hennessy Louis Vuitton Monday announced that they have entered into a definitive agreement where G-III will acquire Donna Karan International, Inc., parent of the Donna Karan and DKNY brands.
The transaction has an enterprise value of $650 million, subject to customary adjustments at closing, and is expected to close in late 2016 or early 2017, the companies said.
The New York Times noted Monday that the sale is just the second in LVMH’s nearly 30-year history, having sold Christian Lacroix in 2005. LVMH shares rose about 1% after the announcement.

Dive Insight:

Donna Karan herself, who retired from her eponymous company last year, complained about LVMH’s stewardship of her brand, which LVMH has repeatedly tried to revive with many different efforts, according to the Times.

While LVMH’s approach is a vertical, luxury-focused model, the Donna Karan line moved toward wholesale and away from her higher-priced apparel to lower-priced lines in recent years. After Karan left, LVMH did away with the high-end Donna Karan line, focusing all its efforts on the lower-price DKNY brand. The luxury giant also disbanded lines like DK Jeans and DKNYC during the process. This shift to G-III may be a better fit.

G-III Apparel Group is an American manufacturer and distributor of apparel and accessories under licensed, owned, and private label brands, including Marc New York, Bass, Calvin Klein, Tommy Hilfiger, Levi's, and Dockers. The company also holds licenses with major sports leagues and operates retail stores under the Wilsons Leather, Bass and Calvin Klein Performance names, among others.

“Donna Karan International is an iconic global fashion company. Its lifestyle aesthetic resonates well with consumers throughout the world,” G-III president/CEO Morris Goldfarb said in a statement. “We are excited to build upon its strong foundation as we seek to capitalize on a significant market opportunity. 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."

LVMH bought Donna Karan in 2002 for about $243 million, after it had gained popularity for its designs for the working American woman. The brand was the first major American designer label for the company, and one of LVMH's biggest moves into the ready-to-wear industry, according to the Wall Street Journal.

While LVMH may have wanted to unload the line, in what the Times characterized as a “rare admission of failure,” the company notably did not opt for a sale to a private equity firm. “We wanted to sell to a strategic partner, not a private equity firm or other financial investor,” Pierre-Yves Roussel, the chairman/CEO LVMH Fashion Group (which includes Donna Karan), told the Times. “G-III are super-passionate about the brand.”

Analysts have also said that this could position LVMH to sell other brands, most noticeably Marc Jacobs and Miami Cruise. LVMH denied that speculation, telling the Times that it is “fully committed” to Marc Jacobs.

“It is an entirely different model” from DKNY," Roussel told the Times. “Much more elevated in price, accessories-driven with shoes and bags, and with almost no off-price outlets and controlled distribution.”