NEW YORK —?When word started to get around three weeks ago that Fred Wilson was heading to Saks Fifth Avenue, it was as if someone had slipped Donna Karan divorce papers while she was on her honeymoon.
This story first appeared in the November 19, 2003 issue of WWD. Subscribe Today.
Karan, a designer who has held an atypical fascination with the financial side of her company throughout its nearly two-decade-long history, made no secret of her disappointment that Wilson is leaving as chief executive of Donna Karan International only a year into their relationship. Now she is preparing to embark on a new romance, a dance with a new partner, a melding of the energy of masculine and feminine —?and these are her words — with Jeffry M. Aronsson, ceo of another LVMH-owned division, Marc Jacobs International.
“At first it was a complete shock to the industry and to the company because of the relationship that, in a very short amount of time, Fred and I have been able to establish,” Karan said during an unusual interview on Tuesday at her offices at 550 Seventh Avenue, with both Wilson and Aronsson on hand.
It was like having an ex-husband along to introduce your fiancé.
But, as was noted when Aronsson, a former corporate attorney who learned the fashion trade at Oscar de la Renta as its ceo for nine years, moved to Marc Jacobs shortly after Wilson joined DKI, the two executives describe themselves as best friends who often vacation together and have pictures on their computers of one another waterskiing. Wilson had repeatedly told Karan that if he should ever leave DKI, that Aronsson would be his first choice for a replacement.
“This company has been through so much, from going public to getting bought by LVMH, that I think it’s just the drama of the whole industry, but Fred got it under control,” Karan said. “What every designer desires most is a partner in crime, somebody who gets you and can be your partner. You can have a dream, but you need someone there who can stand behind you and guide you. The search for Fred’s replacement stopped at (candidate) number one. The search began and ended when Jeffry and I met.”
Well, it wasn’t that simple. Karan, who is said to have an approval clause in her contract with LVMH that allows her to exercise up to three vetoes in the process, held several discussions with Aronsson and vetted him through de la Renta, whose offices are in the same building, before signing off on the appointment. Plus, it couldn’t have hurt Aronsson’s chances of approval that Wilson is becoming the ceo of Saks, which is one of Karan’s biggest clients.
To his credit, Aronsson also has a history of managing designer brands while maintaining a strong discipline over licensing and distribution. He is known for taking a careful approach and studying any potential new situations carefully before offering his opinion, while maintaining a bright optimism and curiosity about the garment business even after many years of dealing with designer egos.
Despite rumors of management differences during his employment at Marc Jacobs, Robert Duffy, president of that brand, said Tuesday that he wished Aronsson well at DKI. LVMH has not yet announced who will replace Aronsson at Marc Jacobs.
“Jeffry will do a great job at Donna Karan,” Duffy said. “And I think Fred Wilson will be amazing at Saks Fifth Avenue. Both choices were really great.”
Karan and Aronsson, who reports to Antonio Belloni, LVMH group managing director, were off to a good start on Tuesday in talking about their goals for the company, which despite recent rumors of poor performance and nagging ones that LVMH would like to sell off the division altogether, they feel is poised for growth. Karan described the Donna Karan brand and its DKNY counterpart, with estimated sales totaling more than $1 billion, as having grown larger than she could have imagined when she started the company with Stephan Weiss, her husband, who died two years ago.
“It’s a picture that’s much larger than me,” she said, “but the potential here is humongous. I don’t think in any way, shape or form has it reached its potential.”
Wilson, who replaced LVMH’s first appointment at DKI, Pino Brusone, has largely been credited with improving the financial shape of the company by restructuring its divisions by brand, improving the quality of distribution by closing more than 35 outlet stores and being more selective with its retail partners, fixing deliveries and generally improving Karan’s price-value relationship.
“Our proportion of regular-priced to outlet stores was just plain wrong,” he said.
Wilson was careful to credit the many division presidents involved in those changes, such as Melissa Parker-Lilly, president of collection; Mary Wang, president of DKNY; and Carol Sharpe, president of retail. During its phase as a publicly traded company, DKI had faced a number of mounting challenges as it expanded through a series of lucrative licenses to balance the steep royalties paid to the designer through a complicated contract that expired when LVMH bought DKI.
“As much as has been done, there’s still a lot left to do,” Wilson said. “Jeffry understands the business, he has a great management sense. He’s logical and he gets it. What Jeff will do, and I’ve already seen it in short order, is to connect with Donna. I think it’s a seamless transition.”
Still, there are serious rumblings of continued problems at DKI, which was acquired by LVMH for a steep price — more than $643 million. Talks of an imminent sale continue to circulate, with near daily rumors that LVMH has approached companies like Federated Department Stores and DKNY licensee Liz Claiborne Inc. about their potential interest. In its announcement of Aronsson’s appointment, LVMH said it “remains committed to developing the Donna Karan and Marc Jacobs brands, both icons of American fashion, which are poised for significant growth in the years ahead.”
None of the executives present during the interview would expand on LVMH’s position, and were also cagey over rumors that Karan’s turnaround hasn’t materialized quite to the degree they have implied. Wilson would only say that its volume is of a much higher quality, meaning that the company is selling more goods at full price than it had in the past.
“The quality of business has improved, the quality of sales has improved and profits are certainly moving in the right direction,” he said. “I can tell you without exception that this company has become profitable, and it’s much, much healthier.”
Although Aronsson said his priority will be to study the blueprints set forth by Wilson, he added that he personally believed in the integrity of the Donna Karan brand and its potential to blossom within the LVMH umbrella.
“What the people at this table stand for, and what I understand makes this company so rich, is the sense of integrity,” Aronsson said. “Without that integrity, you can’t take the creator’s vision and transform it into tangible reality. Donna Karan is an American icon, and at the same time, you have someone who is here talking about the company as being ‘bigger than me.’ That is such a great asset to have the creator, the person who is the source of its DNA, who can at the same time visualize and perpetuate something that is real and that can live beyond an idea.”
Aronsson was named president and ceo of Oscar de la Renta in 1994 and was credited with improving that company’s financial position, as well as the quality of its licensed products and international presence, a point Karan was careful to verify with de la Renta. Prior to working for de la Renta, which Aronsson worked with as an attorney for seven years before joining the firm, he had co-founded Aronsson & Kerker, a boutique law firm specializing in legal services to entrepreneurs, in 1985.
Bernard Arnault, chairman and ceo of LVMH, said in a statement that, based on Aronsson’s track record in building luxury brands, the company believes he will be able to take the Donna Karan brand to “its next stage of growth.”
“When two people dance together really well, that’s a family, and Oscar de la Renta’s business is a family,” Karan said. “Somebody who leads a family is really important to me.”