Karan to Trim Costs, Add Retail Stores

Donna Karan International, the struggling New York fashion house, revealed plans Tuesday to cut costs and become profitable by licensing more products and opening retail stores.

Details of the much-anticipated business plan came a day after Donna Karan disclosed an agreement with Liz Claiborne Inc. to license its DKNY jeans and active wear lines.

The news arrived amid concern about the outlook for women’s apparel, with shares of Liz Claiborne and another manufacturer of designer clothes, Jones Apparel Co., taking a beating Tuesday on Wall Street. Donna Karan’s stock, however, rose modestly on news of the company’s plans.

Donna Karan said its restructuring will save about $40 million over the next 12 to 18 months. It expects revenue to rise to as much as $670 million in 1998, from this year’s estimated revenue of $620 million to $640 million. As previously reported, the company expects to lose $100 million in 1997.

As part of its revitalization, Donna Karan plans to open four DKNY retail stores in 1998, including at least one in California and another in Las Vegas. The stores will sell the designer’s less-expensive casual line.

“We believe there is opportunity to open a limited number of profitable DKNY stores in the United States,” Chief Executive John Idol said.

Besides opening the DKNY stores, the company said, it will increase the number of company-owned outlet stores, where it sells discounted merchandise, to 59 from 52. It also plans to increase the number of licensed stores to 82 from 56, of which only two will be in the United States.

Donna Karan wants to license part of its home furnishings, underwear, children’s wear, menswear and accessories business. Most of the products the company has targeted for licensing are part of the company’s DKNY label, which has struggled due to softening demand for women’s apparel.

“While wholesale will remain the company’s key focus and core competency, we will expand our licensing activities by forming strategic alliances with world-class companies,” Idol said.

Another major part of the restructuring involves reducing the number of divisions within the company from 13 to six, and closing its Italian sourcing office. Donna Karan shares rose 56 cents to close at $14.25; Claiborne shares dropped $4.94 to close at $44.31. Jones Apparel shares fell $3.69 to close at $43.88. All trade on the New York Stock Exchange.