NEW YORK — Less is sometimes more, as Donna Karan International has learned.

After living through management changes, a public stock offering, disappointing financial results, an acquisition by LVMH Moët Hennessy Louis Vuitton and persistent speculation that it’s for sale, DKI has slimmed down and toughened up.

“We have a strategy for future growth and profitability,” said chief executive officer Jeffry Aronsson. “We want to take what’s been a cash drain and turn it into a cash cow.”

As part of that strategy, it closed at least 70 underproductive points of sale, including in-store shops, outlet stores and other strategic partnerships. These units comprised about half of the firm’s third-party distribution, including 15 DKNY outlet stores and two full-price units.

“We have emerged with a dramatic improvement in operating results,” Aronsson said. “We looked at stores that were not productive or not in the right location.” Almost all of the shuttered outlet stores were in malls.

Aronsson said trimming the distribution has allowed the company to focus on its best locations, which in turn has led to a 20 percent increase in full-price sales.

While he declined to discuss sales volume, sources said the DKNY division, which consists of sportswear, accessories, jeans, fragrance, home, licensing and retail, has sales of about $1.7 billion.

On Oct. 18, LVMH released its third-quarter sales. Finance director Jean-Jacques Guiony described third-quarter sales for DKI as “flat,” and said that further reductions in the outlet channel dented strength in retail, licensing and the DKNY line. Aronsson said, “We’ve drastically cut off-price sales, but we’re increasing our full-price sales. Our desired brand-building sales have increased.”

Of course, these initiatives are not new for DKI. The company in the past has talked the same talk of improved quality and better timed deliveries. “It started three years ago and we have completed it,” said Aronsson, who has been with the company for two years. This time, there’s the added element of a new store prototype, which Aronsson billed as a more productive store format.

The design, which is based on a New York City loft, has floors of antique oak and polished concrete. Rolling racks — the kind seen at flea markets — are used as fixtures. Merchandise also is displayed on rough wood tables. There’s a large-scale video projector that beams 60-by-15-foot still images along one of the long walls with views of the New York skyline.

This story first appeared in the October 31, 2005 issue of WWD. Subscribe Today.

The prototype’s first incarnation will bow on Thursday at the Forum Shops at Caesars Palace in Las Vegas, followed by a flagship at the Ala Moana Center in Honolulu later in November.

The beauty of the new store design, said Aronsson, is that it reflects the DKNY brand proposition, which is about “flexibility, starting with a foundation and layering unexpected combinations like metals, irons and woods. The presentation of the merchandise shows the multitude of mix-and-match possibilities and is geared toward multiple unit transactions.”

Aronsson is first revamping freestanding and in-store shops with the new design outside of New York to get out the kinks and fine-tune it. Then it will be ready for its debut “with cymbal clashes on Madison Avenue,” he said. The prototype was introduced at Selfridges in London and will soon bow at Harvey Nichols in London. It eventually will be deployed to DKNY’s 32 existing in-store shops around the world.

DKI has big plans for DKNY in the Far East. Aronsson said he waited until he saw the brand’s sales results in Hong Kong trending positively before negotiating any deals. “In May we had a comp-sales increase in excess of 50 percent,” he said. “It’s been sustained because the product Mary [Wong, president of DKNY] is producing keeps getting better and better.”

There are plans to open two DKNY stores in the spring in China, with three more stores coming at the end of 2006, Aronsson said, noting the company will have a partner in the venture. At the same time, DKNY is opening a flagship in the spring in South Korea, with a partner. There could be as many as 50 freestanding stores and in-store boutiques in South Korea. Some will be devoted to the entire product range, others, to jeans or accessories only.

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