DH and DKNY Still in Limbo
The jeanswear license between Designer Holdings (DH) and Donna Karan International is in its third week of renegotiation.
Talks between the two companies, which have been going on at least since the beginning of the month, are reportedly at an impasse. Million-dollar production schedules have been left hanging in the meantime.
Specifically, industry sources say that DH chief executive officer Arnold Simon wants to produce more of the jeanswear line than had originally been agreed upon, and that Karan did not like the designs that were being presented to her.
The companies, which are both traded on the New York Stock Exchange, declined comment Wednesday.
DH, which also holds the license for CK Calvin Klein jeanswear, signed a 30-year agreement for DKNY Jeanswear on Sept. 27. Women’s and men’s products were scheduled to launch this fall, with a projected $85 million to $95 million in wholesale sales in the first six months, and an extensive ad campaign set to launch in March.
According to the agreement, Donna Karan would oversee design while DH would handle sales, manufacturing and distribution.
DKNY Jeans would have been the fourth meganame to enter the designer jeanswear fray. CK Jeans, Tommy Hilfiger and Polo Jeans have revitalized the designer jeans business in the last two years by presenting sophisticated products at competitive prices, supported by multimillion dollar ad campaigns.
Rumors of trouble in the DKNY deal first began to circulate in January, when stores getting ready to write fall orders were told product would not be ready for a few more weeks. On Feb. 10, DH and Donna Karan released a statement that said “unexpected difficulties” had arisen and that amendments to the original deal were being negotiated.
Donna Karan’s president and chief operating officer Stephen Ruzow and Simon met with WWD at the WWDMagic show in Las Vegas Feb. 18, where some DKNY men’s jeans were being shown and the company was taking orders for fall deliveries.
Anna Sui has signed a license with Gilmar Group to launch a line of jeanswear under her name. It is her second venture with the Italian manufacturer, which also makes the Sui by Anna Sui line of bridge-price apparel.
The line is set to be launched for fall selling. It will wholesale from $40 to $60 for pants, $35 to $70 for skirts, $40 to $80 for shirts, $20 to $65 for T-shirts and $120 to $180 for outerwear.
Fabrics include velvet, windowpane plaids, pinstriped wool, leopard prints and dark denim, as well as the wool and nylon used for outerwear styles. Styles include jackets with shaped waists and wide lapels, basic dark jeans, slim pants, long A-line skirts and dresses and related knit tops.
The logo of the jeans line is a stylized doll head, partially inspired, said Sui, by the Biba look of the Seventies. It will appear on hangtags as well as being screenprinted on T-shirts, knit tops and dresses.
“I’ve always been interested in jeans, but we’ve been limited in how much we can do here,” said Sui, who produces her signature line in New York. “But when Gilmar offered, it made sense — they have the capability to produce exactly to my specifications, and then manufacture and distribute. It’s great to have that big confidence factor.”
Sui said the jeans line, as with much of her collection, will be inspired by rock ‘n’ roll. Certain styles and fabrics will be consistent from season to season, including looks Sui calls “my classics.”
“This is a fashion jeans product,” said Paolo Gerani, vice president of Gilmar, in a statement. “We’re not trying to compete with the basic jeans brands. It will give more people a chance to buy something with Anna’s label.”
Steve Hamilton, vice president and managing director of Gilmar USA, said the company plans to distribute the jeans line first to Sui’s existing store base and then seek broader coverage in better department stores. Hamilton said he is planning to develop in-store shops and freestanding stores.
“We see this as a lifestyle collection,” he said. “We work very closely with Anna; it’s not like a typical licensee, where once she designs the product, we never see each other again.”
The new line’s U.S. headquarters will be at the Gilmar showroom, 745 Fifth Avenue, New York.
Arnold Simon, chief executive officer of Designer Holdings, which holds the licenses for the CK Calvin Klein and DKNY Jeanswear lines, is this year’s designated news maker honoree at the Jeanswear Communications lunch March 18.
Each year’s guest of honor is chosen by a committee of denim executives from mills and manufacturers. Tom Hutchens of J.C. Penney was named in 1995 and Meg Rist of Sears, Roebuck won the honor last year.
Merrill Lynch Cuts Guess
Shares of Guess Inc. fell 1 1/2 to 10 1/2 on the New York Stock Exchange Wednesday after Merrill Lynch & Co. cuts its 1997 estimates to between $1.35 and $1.40 a share from $1.54.
The investment firm also lowered its ratings for the manufacturer to “neutral” from “long-term accumulate.”
“Intensified competition in the basic denim category, which accounts for nearly half of Guess’s sales, is taking a bigger toll on its domestic wholesale business than anticipated in the current quarter,” said Brenda Gall, Merrill’s veteran apparel analyst.
Despite a modest 2 percent decline in domestic wholesale volume in the fourth quarter, Gall said in a research note that the wholesale volume is “now projected to be off in high single digits” for the first quarter.
She added that international sales, which gained 134 percent in the fourth quarter, are expected to record a less-than-expected 15 percent increase this quarter.
Bringing the women’s knitwear license in-house is also hurting royalties, she said.
As reported, adjusted for its initial public offering in August, Guess earnings jumped 26.5 percent in the fourth quarter to $11.9 million, or 28 cents a share. The earnings topped Gall’s estimate by a penny.
Sales in the quarter gained 12.3 percent to $139.3 million.
In the full year, earnings before a $3.6 million pretax reorganization charge grew 25.8 percent to $54.4 million, or $1.28. Revenues were up 13.2 percent to $551.2 million.
Gall said there are indications that U.S. wholesale volume will be flat in the second quarter.
“Management is hopeful that the inclusion of knitwear revenues and initial shipments under the ‘Key Items’ program, which begins in June, will permit high-single-digit gains in last-half domestic wholesale revenues.”
Levi Strauss & Co. said total company sales rose 6 percent in 1996 to $7.1 billion.
Sales in the U.S. gained 7 percent to $4.3 billion, reflecting strong demand for the men’s, women’s and youths’ Levi’s branded products, as well as the Dockers brand, particularly in women’s, the denim giant said in a statement.
Since chairman Robert D. Haas and other family members took the company private through a “cash merger transaction” last year, there are no public securities requiring filings with the Securities and Exchange Commission. Last year, Levi Strauss spent about $500 million to buy out all of its employee shareholders at $265 a share.
As reported, the company announced plans last week to slash 1,000 jobs in the U.S. to cut overhead and reduce operating costs.
Outside the U.S., total sales for 1996 increased 6 percent to $2.8 billion, Levi said. The gain was driven by higher sales in Europe, due to a favorable product mix emphasizing sales of 501 jeans and overall increased demand for Levi’s denim products in Germany, the U.K. and Benelux (Belgium, the Netherlands and Luxembourg).
But the improvement in Europe was slightly offset by lower sales in the company’s Asia Pacific division, due to “sluggish economic conditions” in Japan, South Korea and Australia.