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What's Next for DKNY?

After acquiring DKNY for $650 million, apparel firm G-III has cut a series of deals that could initially raise brand awareness and sales, but ultimately damage the label's premium image.
DKNY Spring 2017 | Source: Courtesy
By
  • Limei Hoang

NEW YORK, United States — When G-III announced in July 2016 that it would acquire Donna Karan International from LVMH for $650 million, industry insiders wondered what the old-school apparel company — best known for licensing big-name brands — would do with DKNY, the diffusion line that became the core of the fashion house when Karan stepped down and closed her high-end label in 2015.

Since G-III closed the deal in December 2016, it has unveiled a wholesale-focused strategy that flies in the face of current retail trends favouring the direct-to-consumer model, raising the question of whether its approach is a long-term solution or a short-term fix.

Just this week, the company announced a licensing agreement with Calvin Klein and Tommy Hilfiger owner PVH, which will develop a new DKNY brand, DKNY Sport for Men. The first collection will debut in Spring 2018 and be sold in department stores across the United States and Canada.

At first blush, the partnership appears to be downright sensible. “There are a lot of synergies with DKNY and Calvin Klein and Tommy Hilfiger,” says Robert Burke, chief executive of advisory firm Robert Burke Associates. “PVH knows those businesses really well and G-III knows how to produce the product.”

But according to analysts, the move is just a short-term solution to raise DKNY’s brand awareness, and could limit brand control in the long term.

When you have these kind of partnerships, neither side has perfect control

“When you have these kind of partnerships, neither side has perfect control,” says Neil Saunders, managing director of research firm GlobalData Retail. “For some middle-of-the-road kind of brands, that’s fine. But I always think for high-end brands, or more expensive brands, the whole point is that there is a sense of creative direction and brand story behind them that needs close control.”

The new licensing deal follows G-III’s partnership with Macy’s, announced in March, to exclusively sell DKNY women’s apparel, handbags and shoes. “The biggest push from department stores is to have exclusive product,” says Burke. “It’s the only way they are going to be able to compete against each other and all the other online competitors like Amazon and Shopbop.”

A spokesperson for G-III could not be immediately reached for comment, although the company has expressed plenty of confidence in its approach in recent months. “We believe that Macy’s is the ideal partner as we implement our strategy for DKNY to be the premier brand in the world for women’s apparel and accessories,” Morris Goldfarb, chairman and chief executive of G-III, said in a statement announcing the Macy’s deal.

But G-III’s Macy’s deal could actually prove counterproductive, argues Saunders. “I don’t think DKNY has the pulling power of other brands in the market among large swathes of customers so I think that exclusive deal has really limited their exposure,” he says. “[This is] good from the point of view they are not driving ubiquity, but it’s not great from the point of view of driving sales.”

Saunders believes G-III needs a much tighter distribution strategy that is built around the DKNY brand and its own stores, as seen with Coach and Ralph Lauren, which have pulled back from wholesale. "It is more complicated and slightly more expensive but I think in the long run it's likely more successful," he explains. "The fact that they haven't done that, signifies to me that what they really want is a kind of a quick win."

The wholesale strategy could even be described as “dangerous” for a premium brand like DKNY, Saunders warns. “I think you get into devaluing the brand. DKNY actually is not that strong. Overall, they are probably going to get more sales out of [this strategy]. But for the long-term of the brand, I’m not sure it’s quite so sensible.”

Related Articles

DKNY Confirms Departure of CEO and Creative Directors
Pierre-Yves Roussel on Why LVMH Sold Donna Karan
LVMH Sells Donna Karan to G-III Apparel for $650 Million

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