PARIS — LVMH Moët Hennessy Louis Vuitton is tightening its grip on Donna Karan International — and enriching the designer with fresh millions.
The French luxury giant paid Karan $43.8 million during the first quarter of 2004 to increase its stake in DKI to 98 percent from 89 percent, according to a recent statutory filing here with Balo, France’s official government publication of record.
Karan owns the remaining 2 percent of the company’s capital.
In a statement, the designer said, “When Donna Karan International was sold to LVMH in 2001, I retained an equity interest in the company. The original agreement provided that I would have the opportunity to sell a portion of my ownership back to LVMH, which I did in January 2004. I still hold a meaningful equity investment in DKI and am extremely excited about DKI’s future and my role as DKI’s creative director.”
Karan struck a $643 million deal three and a half years ago to sell her design and licensing company to LVMH at the height of the French luxury group’s acquisition spree. The price included $400 million for Gabrielle Studio Inc., the licensor of the New York firm’s trademarks that was owned by Karan and her husband, Stephan Weiss, who died in June 2001. The balance represented the cost of acquiring all outstanding common stock in DKI.
LVMH made the latest, compulsory filing with Balo in advance of its annual shareholders’ meeting next week. Its filing also underlines the poor performance of Donna Karan already highlighted by LVMH last month, when it reported a 1.7 percent rise in consolidated sales for the first quarter to $3.57 billion, or 2.85 billion euros at current exchange.
Karan was “barely” profitable in 2003, as sales declined about 15 percent to less than $400 million, according to a research note published Wednesday by Antoine Belge, luxury analyst at HSBC in Paris.
As reported, DKI revenues were down about 30 percent in dollar terms in the quarter ended March 31, due to store closures and the loss of sales from the European jeanswear business, which is now licensed.
Those measures are expected to have a “slightly positive” impact on profitability for the full year, according to Belge, who pegs DKI’s EBIT margins at 2 percent for the year.
LVMH’s Balo filing also revealed that the group upped its stake in Millennium Import Co., which controls the Polish distillery that turns out the premium vodkas Belvedere and Chopin. LVMH paid $107 million to increase its stake to 70 percent from the original 40 percent it bought for $75 million in July 2002.