Dec 2, 2016
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DKNY CEO and creative chiefs are out as G-III signals new era

Dec 2, 2016

G-III Apparel released its Q3 results late yesterday but the story everyone wanted to hear about was DKNY, the label it has acquired from LVMH. On the day that it completed its acquisition, DKNY’s CEO and creative chiefs announced their departures.

DKNY - Spring-Summer2017 - Womenswear - New York - © PixelFormula

The news may not have come as a surprise to some with the label having struggled to build the momentum it needs for growth during its time with LVMH. Maxwell Osborne and Dao-Yi Chow’s streetwear-focused collections had received mixed reviews, although their S/S17 show in September was praised by critics.

They have been in co-creative control for nearly two years and said the decision to leave was theirs. “Given the company sale and subsequent change in strategies, we have decided to step down and focus on our own business Public School,” they said in a prepared statement.

They are leaving at the same time as Donna Karan International CEO Caroline Brown steps down. She said in her own statement: ”As Donna Karan International transitions to new ownership and therefore new directions, I have decided it is the right time to step down and explore new possibilities. I know the company rests in good hands under the new leadership of G-III for the next stage of its development.” She is not believed to have another post to go to at present.

Donna Karan International was sold to G-III for $650m. LVMH had previously announced a new strategy to focus on DKI's  more affordable DKNY line but analysts said the French luxury giant was struggling with its turnaround. However, it said this summer that it only sold the label after an approach from G-III. The American firm said at the time that it saw “a significant market opportunity” in the brand that it could add to its licenses for Calvin Klein, Tommy Hilfiger, Karl Lagerfeld and Ivanka Trump, among others.

G-III CEO Morris Goldfarb said yesterday he believes DKNY can reach $1bn in annual sales. He added that he is “working closely with our partners and through our strong licensing network, [and] we are confident we can quickly bring to market a comprehensive and compelling lifestyle offering that will restore the Donna Karan International brands to prominence and excite consumers.”

It is unclear whether DKNY will be given a new named creative head, with some analysts suggesting it might not.

But it is clear that G-III needs to make a success of its latest acquisition. The company yesterday reported earnings that again missed analysts’ estimates. It said that its Q3 net profit fell 19% to $70.6m while sales fell 2.9% $883.5m. Its shares fell almost 10% after the markets closed as a result.

Goldfarb was upbeat though and said he believes “that our premium brands, including those that come with our acquisition today of the Donna Karan business, position us extremely well to drive sales and profit growth well into the future. We see a multi-billion dollar revenue growth opportunity for our company over time.”

Why did sales fall? The company said that non-outerwear wholesale remains its strongest category but, as analysts had expected, warmer weather this season has caused problems. The company will reduce its exposure to the category as a result and that could mean that it will convert some stores currently carrying outerwear, with some likely to be transformed into DKNY locations.

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