PARIS, France — LVMH's decision to sell Donna Karan International to American manufacturing and licensing company G-III Apparel Group was an unexpected move by the French luxury conglomerate, which rarely sells its brands.

Over the past 18 months, LVMH has spent considerable resource rebooting the company, cleaning up multiple licensing deals and re-positioning the label around its lower-priced DKNY diffusion brand, installing Maxwell Osborne and Dao-Yi Chow of Public School as co-creative directors, whose first two collections received a cool critical reaction.

The scale of the investment was clear when, in April, LVMH partially attributed disappointing first-quarter sales figures in its fashion and leather goods division to the discontinuation of the DKNY Jeans and DKNY C lines, which represented lost income of around $200 million.

So why sell now?

According to Pierre-Yves Roussel, chairman and chief executive of LVMH's fashion group, the deal was the result of unsolicited, inbound interest from G-III, which makes licensed clothing for brands like Calvin Klein, Tommy Hilfiger and Karl Lagerfeld, and offered to buy the business at a high valuation of $650 million — and not because the reboot was a creative and commercial failure, as some have suggested.

“We were not looking to sell it,” Roussel revealed to BoF in an interview. “We had moved the pieces in the right direction and I think we were starting to move forward… But [G-III] came with a very high price.”

On further reflection, Roussel said the group also realised that DKNY’s diffusion brand business model was a poor fit for LVMH, whose core expertise is rooted in growing luxury brands with a focus on accessories, selective distribution and brand-building runway shows. Diffusion brands, by contrast, usually rely on ready-to-wear and wide wholesale distribution through department stores.

"DKNY is a different model," said Roussel. "Our decision had nothing to do with the creative casting. I still believe that the brand can be really big. But it is going to be big under their umbrella. I think we could have done it and if we didn’t have that offer, we could have pushed it for the next two, three, four years and I’m sure with success, but probably not as much success as [G-III] would do because it’s their core model. You know, at the end of the day, there is only so much that you can do. We have a lot of brands, there is investment, but where should we invest our money, what’s our best deal?”

Roussel stressed that LVMH was still committed to developing its contemporary brands, taking care to differentiate these from a diffusion brand like DKNY and citing the group's success with Marc Jacobs and Kenzo.

"They have to have some characteristics. It has to have a strong brand and a real accessories business, which we did with Kenzo, it’s a very targeted and controlled distribution, obviously it has a European legacy, which is very different,” he added.

“We like that segment. We’ve been learning," he continued. "So we are not divesting from contemporary by any means, we are actually interested in that segment. But there is [only] so much you can elevate DKNY as a brand. You can inject energy and creativity but if you look at Kenzo... we have not fundamentally changed the positioning. We've actually taken Kenzo down, in a way, from where it was. Marc Jacobs, we are rebranding everything with Marc Jacobs."

Reflecting on the similarities between contemporary and luxury business models, Roussel continued: "That's why there are a lot of luxury players, hiring contemporary and vice versa — designers doing one or the other, and so on because there are differences but also there is much more crossover, whereas diffusion is a different model."

As for the team at Donna Karan, prized chief executive Caroline Brown will continue to oversee the brand for a transitional period until the sale to G-III is complete, said Roussel, adding that Brown and G-III founder Morris Goldfarb were meeting to discuss the future. "It's a big deal for him, so I'm sure he will rely on the team. It will be discussed with the management team, it will be discussed with the creative team and it will be their decision."

Disclosure: LVMH is part of a group of investors which has a minority stake in The Business of Fashion.

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[ LVMH Sells Donna Karan to G-III Apparel for $650 Million ]

[ Donna Karan's Departure No Surprise ]

[ Pierre-Yves Roussel, Fashion Alchemist ]