DONNA KARAN STOCK JUMPS 16%

NEW YORK — Shares of Donna Karan International Inc. surged 16 percent to 11 3/4 Wednesday after a fund manager made positive comments about the company in a TV broadcast.
About 1.4 million shares of the stock changed hands, compared with average daily trading of 84,200 shares.
Robert Olstein, head of the $140 million Olstein Financial Alert Fund, told WWD that Donna Karan is making “major changes” that should bring strength to the bottom line.
Company sales are growing by 10 to 15 percent, Olstein said, and if the company is able to maintain net margins of 5 to 7 percent, it can earn $1.25 to $1.50 a share in 1997. The firm has net margins of 2.1 percent.
Olstein said the changes at Donna Karan will increase its profitability: “The first move was buying its jeanswear license back from Designer Holdings, which should help Donna’s jeanswear profit margins triple.”
He also said the company should license its beauty and fragrance lines, which would also boost profit margins. Karan is currently exploring alternatives to its present ownership of the beauty business, as reported. It has hired Morgan Stanley to find an investor and Jane Terker, president of the Donna Karan Beauty Co., noted the firm is looking into two possible courses of action — an outright sale or a joint venture.
“This is a company with about $600 million in revenues,” Olstein noted. “All it needs to do is bring 5 percent of that to the bottom line, and it can have over a dollar a share in earnings.”
Donna Karan went public last June at 24 and climbed as high as 30 1/2. However, the stock price has been steadily declining as costs soared and quarterly losses were posted. Shares fell to 8 7/8 last month.
Olstein made his first comments on CNBC’s “Squawk Box.”

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