Donna Karan and DKNY are packing their bags for China.G-III Apparel Group Ltd., which acquired Donna Karan International last December for $650 million, has inked a partnership with Fred Gehring’s investment fund, Amlon Capital BV, to produce and market women’s and men’s apparel and accessories under license for DKNY and Donna Karan in the People’s Republic of China, including Macau, Hong Kong and Taiwan.G-III will own 49 percent of the joint venture, while Amlon will own the balance. It will be funded with $25 million of equity that will be used to strengthen the DKNY and Donna Karan brands and accelerate growth of the business in the region. Effective Jan. 1, this joint venture will be the exclusive seller of the brands in the territory. The venture replaces several distribution deals that were previously in place, and includes a licensing stream and sourcing income to G-III. The big driver is expected to be stores, both company-owned and franchised.Gehring, former Tommy Hilfiger chairman and chief executive officer and former PVH vice chairman, will be chairman of the joint venture and Steve Shen, former chief executive officer of Tommy Hilfiger China, will be the ceo of the joint venture.Gehring was instrumental in Hilfiger’s turnaround, having made the critical decision in the mid-to-late Nineties to stay focused on its core DNA of classic premium products while running the Hilfiger business in Europe.Gehring set up Amlon in 2016 with partners from his time at Tommy Hilfiger and private equity firm Apax Partners that took Hilfiger private in 2006. Amlon, a private investment vehicle, invests in apparel and accessory brands and has stakes in Karl Lagerfeld, Denham Jeans and Vingino, a children’s wear brand.Morris Goldfarb, chairman and ceo of G-III, said, “In our industry, Fred has no peer and his tenure at Tommy Hilfiger and PVH is a testament to that. He is a great partner with us on the Karl Lagerfeld brand. We are excited to extend this strong partnership and work with him and his team on growing the DKNY and Donna Karan brands in China. Steve’s track record in China is outstanding. We are looking forward to collaborating with these accomplished retail industry veterans to aggressively grow our business in the greater China region which is a major strategic opportunity for us.”Gehring added, “DKNY and Donna Karan are truly global, iconic fashion designer brands. There are only a few brands with similar authenticity and standing. I am excited to extend my partnership with G-III to invest and grow the business with these brands in China. My long-term business partner Steve Shen, who successfully built Esprit and then Tommy Hilfiger in China, will lead the business for us. He did an amazing job for Esprit and Tommy Hilfiger, and I am confident that he will be equally successful with the DKNY and the Donna Karan brands.”Shen noted, “There is huge growth potential for the DKNY and Donna Karan brands in China. I look forward to working with Fred and his partners at Amlon again and to be joining forces with Morris and G-III on this exciting opportunity.”The DKNY and Donna Karan merchandise for Chinese distribution will be a combination of both G-III offerings and specially designed product by the operating company in China.Interestingly, Donna Karan was the first American designer to open a fashion store in China. In 1993, the designer opened a shop in Shenzhen, the special economic zone adjacent to Hong Kong. The store, in conjunction with Joyce of Hong Kong, sold DKNY. In fact, Joyce Boutiques was the first customer for Donna Karan and DKNY in Hong Kong. In the early Nineties, DKNY had a deal with Christina Ong to open DKNY stores throughout Hong Kong, and Karan later had a deal for DKNY with ImagineX in China and Southeast Asia.A.T. Kearney's Global Retail Development Index cited China right behind India as one of the most attractive markets for retail investment. Even as macroeconomic growth slowed to 6.7 percent in China in 2016, retail was a bright spot and grew at 10.4 percent. Among the report’s key findings was that in terms of size and momentum, Asia is the driving force behind global retail and the expansion of apparel, fashion, luxury, branded foot and beverage and personal-care products.As reported, last week the International Monetary Fund raised its full-year China GDP growth forecast to 6.7 percent from 6.2 percent following better-than-expected growth in the first half of the year. China’s economy expanded 6.9 percent, above Beijing’s full-year target of 6.5 percent.According to state media Xinhua, consumption accounted for 63.4 percent of GDP growth in the first half of 2017, compared with 44.7 percent during the same period in 2010, and is expected to exceed 70 percent this year.Meantime, the first DKNY and Donna Karan merchandise, under G-III, is about to hit the U.S. market.DKNY women’s, which will be available in early September, is an exclusive to Macy’s and macys.com in the U.S. and will also be sold at DKNY retail locations globally, DKNY.com, Hudson’s Bay Co. and several international department and specialty stores. The collection retails from $49 to $399. In addition, DKNY Sport, a lifestyle active collection, will be available in early September at the same locations as DKNY, retailing from $39 to $150.G-III will also introduce its first Donna Karan collection, which includes women’s apparel and accessories at stores next month. A notch more upscale, Donna Karan retails from $80 to $700 and will be available at stores such as Saks Fifth Avenue, Bloomingdale’s, Dillard’s, Lord & Taylor, Hudson’s Bay Co. and Harvey Nichols. In addition, G-III will offer Donna Karan Active. That collection will be available in November, and will retail from $39 to $150. Stores that will carry Donna Karan Active are Lord & Taylor (fall and resort), Bloomingdale’s (resort), Dillard’s (resort) and Stitch Fix (resort).As reported in an interview last March, Goldfarb said that DKNY can easily be a business generating “north of $1 billion in the next three to four years.” He said Donna Karan could perhaps do $500 million within five years. “DKNY has a head start from Macy’s,” he said.For the fiscal year ended Jan. 31, G-III had net income of $51.9 million on revenues of $2.4 billion.Besides Donna Karan and DKNY, G-III’s owned brands include Vilebrequin, G.H. Bass, Andrew Marc, Marc New York, Eliza J and Jessica Howard. The company also has fashion licenses under the Tommy Hilfiger, Calvin Klein, Karl Lagerfeld, Kenneth Cole, Cole Haan, Vince Camuto, Guess, Ivanka Trump, Kenzie, Levi’s and Dockers brands. In addition, it has licenses with many team sports businesses, such as the National Football League, National Hockey League, Major League Baseball and the National Basketball Association. It also operates stores under the DKNY, Wilsons Leather, G.H. Bass, Vilebrequin, Calvin Klein Performance and Karl Lagerfeld Paris nameplates.
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