This is a breaking news for the fashion industry, following rumours last week, LVMH has agreed to sell Donna Karan International Inc. to G-III Apparel Group Ltd. for an enterprise value of $650 million.
The label that once defined workplace attire for successful U.S. women was undergoing some hard times the last few years. 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. Despite its famous fans such as Hillary Clinton and Michelle Obama, the brand was becoming to be out of fashion since the spread of casual workplace dressing has proved a challenge.The sale reflects LVMH’s inability to generate profitable growth from the Donna Karan business.
The company had decided to sell both brands-Donna Karan as well as DKNY- after seven months of “disappointing performance” under new designers Maxwell Osborne and Dao-Yi Chow. Luca Solca, an an analyst at Exane BNP Paribas explained : “Selling DKNY is a way to get rid of a problem at a time when the market is tough,”, he added : “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.”The solving-problem process was not an easy way to take but by exploring the brand’s last turnover Toni Belloni, managing director of LVMH said in a statement : “When G-III approached us about acquiring the brand, we concluded that the time was right.”The transaction makes it likely that LVMH announces plans to buy back 1 billion euros ($1.1 billion) of stock, wrote Fred Speirs, an analyst at UBS. LVMH is scheduled to report results Tuesday.
Advised by Barclays Plc, G-III said it expects the acquisition to weigh on profit in the fiscal year through January 2018, and boost earnings from then on. The New York-based company is taking on debt to fund the purchase, and expects the transaction to be complete by early next year.
Let’s wish a good luck to both G-III and Donna Karan for this new adventure!