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Donna Karan
Donna KaranDKNY Donna Karan International was originally founded by Donna Karan in 1988. Her father was a haberdasher, her mother a showroom model. Born in New York city in 1948. She designed her first collection as early as high school to go on to fulfill her dreams in further education in design school. A former student at the Parson s School of Design, she serves on their board. Karan began her career at Ann Klein in 1971 as assistant from 1968-1974. Taking over as successor upon Klein s death and creating the Anne Klein II line in 1982. The first show was held in New York in 1984. She started DKNY in 1988, and added the menswear line in 1991. She won numerous design awards, and was elected to the COTY Hall of Fame. New York famouse designer Donna Karan has taken her company public on June 28,1996 at 10.8 million share offering and twenty four dollars per share. Analysts said that Karan s timing could not have been better. Name-brand fashion and luxury companies have been well received at that particular time. Behind Donna Karan s glamour was a solid half of a billion dollar company. Furthermore, it wass in a better shape than in 1993, when a previous attempt to take company public was canceled due to valuation concerns. Profits at that time were rising and are expected to jump 32 percent that year due to strong sales in the company s more moderately price DKNY clothing line, men s apparel and beauty division. However, some worried that mass-marketing those lines may backfire. Their concerns proved to be right. All the glamour and dazzle however did not change the fact that the company was not doing so well. Donna Karan is a famouse woman with a company in great deal of trouble. Donna Karan isn't a movie star. But she dresses them on TV in the movies and at the Oscars. The queen of design has gone so far as to spend in excess of $1 million on a 128-page advertising supplement to the current issue of Vanity Fair to gain favor with Hollywood. That's not small change considering Donna Karan International is expected to follow it s second consecutive year of great losses -- quite a performance for a company that's been public for only three years. Despite the designer's tendency for glamour, investors are pushing DK shares to discount prices. Since July, the stock has slipped 63.1% to 5 +.That s quite a fall for a woman who was included in Vanity Fair's November issue saluting America's 200 most successful women. On August 1, 1997 Stephen Ruzow, Donna Karan International s president and chief operating officer, has resigned effective immediately. Donna Karan s stock fell 12 percent on the news, dropping $1.93 to 12.06 + in the morning trading Friday on the New York Stock Exchange. Ruzow, who also resigned as a director, continued working as a consultant for the company for the next six moths that followed . No reasons were given for his resignation. Ruzow s departure followed Monaday s appointment of John Idol, an executive from rival Polo Ralph Lauren Corp. as chief executive. Idol, who began August 11,1997, replaced company founder Donna Karan. She remained chairman and chief designer. Donna Karan also reported a second-quarter loss on that Thursday of $14.7 million or 68 cents a share compared with a loss of $1.5 million, or seven cents a share, a year ago. Revenue fell to $111 million from A$117.6 million. Idol soon set in play a cost-cutting plan that, coupled with lucrative licensing agreements, was intended to place DK in the black for the most recent year. But a thread popped in December when a planned licensing agreement -- expected to add $5 million to the company's assets in the fourth quarter -- unraveled. As a result, the First Call 1998 consensus fell to a loss of 13 cents per share from a profit of 32 cents per share. Then, Idol's absence from the Seventh on Sixth fashion shows in February fueled talk that he was looking for a new job, which he denies. Says Idol, "I have a five-year contract with [the company]. I love working with Donna. I'm not going anywhere." Not as much can be said for general counsel David Bressman, who recently resigned "for personal reasons," a company spokeswoman says. Bressman couldn't be reached for comment. Despite these recent problems, Idol says his plan to turn the company around is on track. To his credit, Idol has decreased DK's operating loss from an astonishing $91.3 million last year. And he accomplished this at a time when many apparel manufacturers had difficulties. Low sales at department stores relative to specialty stores has left some manufacturers with great amount of inventory. And department stores, on the other hand, have been relying on fewer popular names to guarantee sales. "I feel very strongly that, over the next 24 months, we'll have the kind of returns that will get people excited about this company," Idol says. So far his plans have drawn mild success and much criticism. They include stimulating demand for DKNY, a label which falls just below the company's collection lines, in department stores by cutting prices; building brand awareness by opening specialty stores; and signing more licensing deals. Price cutting is a tricky approach because it could tarnish the brand's appeal. So far the strategy appears to be working, according to several retailers, who say they are enthused by the spring 1999 DKNY men's line, which is selling at a 35% discount to previous prices. Women's DKNY will follow at a 17% reduction. Idol says he's able to keep quality and margins constant despite the lower prices because the company is using fewer factories, which, in turn, are giving the company volume discounts. Perhaps Idol's most ambitious and controversial project to date is to expand DK's specialty store presence. The company most recently bought back three stores in the United Kingdom from licensees. The stores were previously owned and operated by an affiliate of Club 21 PTE Ltd., a Singapore based company, affiliated with Ong Beng Seng. The acquired stores include one Donna Karan New York store located in London, England and two DKNY stores, one in London and one in Manchester, England. The agreement also terminates all existing retail and distribution arrangements between the two companies in the United Kingdom. The Donna Karan New York Collection flagship store on New Bond Street in London and the DKNY flagship store on Old Bond Street in London were the Company's first global flagship stores. John Idol, Chief Executive Officer, said, ``The buyback of the London stores is consistent with our on-going strategic efforts to develop the global presence of Donna Karan International. We were very pleased with the opportunity to acquire these retail operations, and believe that owning stores in prime international locations supports our previously announced strategy of developing Company-owned full price retail stores.'' Ong Beng Seng said, ``We are proud to have had the opportunity to develop a Donna Karan New York and DKNY retail presence in the United Kingdom. The two flagship stores, both of which have prestigious London addresses, have had a positive effect on the global strength and image of the brands. We look forward to a continued relationship with Donna Karan International Inc. in Asia.'' Donna Karan International Inc. is one of the world's leading fashion design houses. The Company designs, markets and distributes ``designer'' and ``bridge'' collections of women's and men's apparel, sportswear, accessories and shoes under the Donna Karan New York and DKNY brand names, respectively. The Company has selectively granted licenses for the manufacture and distribution of beauty and beauty-related products, DKNY jeanswear and activewear products, DKNY men's tailored clothing, shirts, neckwear, hosiery, intimate apparel, eyewear and children's apparel. The strategy has drawn criticism from some fashion insiders, who point out that flagship stores, while useful for brand building, are typically money loses. Not his stores, says Idol, insisting they will be models (albeit supermodels) of fiscal responsibility. He says the DKNY flagship store in London is profitable, although he admits the Donna Karan Collection store in the U.K. is running at a loss. "We won't be opening any future stores that aren't profitable," he says. Finally, there are the all-important licensing agreements. The company has licensed everything from fragrance and jeans to hosiery and eyewear. Analysts like the strategy, because it lets DK get new opportunities to expand into new product categories while avoiding start-up costs. The strategy works best for areas outside a company's core expertise. For instance, DK lost roughly $100 million in an attempt to develop a beauty brand in-house before agreeing to license its name to Estee Lauder. But in licensing jeans and activewear to Liz Claiborne, critics say that DK gave away its future growth potential. They point to Tommy Hilfiger, which recently boosted its earnings growth by buying back its jeans licensee. DKNY Jeans, which launched last year, and DKNY Activewear, which is scheduled to hit stores this spring, are bright spots for Liz Claiborne. Jennifer Black, an analyst with Black & Co., says the jeans business generated roughly $70 million in U.S. sales its first year and expects growth of 70% this year. Black doesn't follow Donna Karan. "I know people are concerned that it's cannibalizing our existing business," Idol says. He adds that, in reality, the overlap is limited. For instance, the company's own DKNY merchandise is in only three Macy's East stores, while Liz Clairborne's DKNY Jeans will be in 50 stores. Macy's East is a Federated Department Stores unit. No matter how much attention Idol pays to the bottom line, the company will still be subject to the impulse of its founder. Take the Vanity Fair insert the largest advertising supplement ever purchased in a U.S. consumer magazine. "It opens a Pandora's box in how they spend money," says a person familiar with the company.

For the future plans of Donna Karan International, Karan is personally footing the bill for her company s first signature boutique in New York City.The 10,200-square-foot, three level store, in the center of Madison Avenue s most popular spot, at 819 Madison Avenue between 68th and 69th streets, is expected to open next fall. Karan will own and operate the store. It will likely cost as much as ten million, according to real estate sources. The mid-block location is next to where Armani s original store was before the Italian designer built a larger store across the street. Versace then moved in next door. Max Mara and Bogner are also neighbors. The address Is a double-wide storefront, with 50 feet of Madison Avenue frontage, considered to be one of the most popular locations. Various designers, such as Tommy Hilfiger as well as some Italian designers, were said to be interested in the space before Karan signed on the deal. Included in Donna Karan International store expansion is a lower-priced DKNY store which should open in the spring on 655 Madison avenue. Designers from all over the word have been trying to open stores, particularly on the 12 block stretch of Madison avenue from 60th to 72nd streets. At the present time, Donna Karan, designs, contracts for the manufacture of, markets, and distributes designer collections of men s women s clothing, sportswear, accessories, shoes and beauty-related products. After the nine months ended on September 27, 1998 net revenue fell 2% $476.6 million. Net Loss income totaled $3.3 million. Revenues reflect a decrease in sales in each of the company s wholesale divisions. Earnings benefited from lower selling and marketing costs. Donna Karran currently employs 1540 employees. Inna Iof03/12/99Financial Accounting Donna KaranDKNY Return on assets ratio Net Income/ average assets -22.59 Return on Equity ratioTotal Debt/Total Assets -47.78Profit Margin Ratio Net Income/Net Sales -10.32 Current ratio Current Assets/ current Liabilities2.21
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