Good news for DK investors, from WSJ:
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Donna Karan Board Is Seeking
New Executive, Potential CEO
By WENDY BOUNDS
Staff Reporter of THE WALL STREET JOURNAL
Directors of Donna Karan International Inc. are
searching for an outside executive to take over the
day-to-day operations of the company and possibly
succeed founder Donna Karan as chief executive, a
dramatic shift for the celebrated designer as her
company struggles with high costs and a weak stock.
People close to the talks say under any scenario, Ms.
Karan would remain chairman and chief designer of the
company but is considering ceding the CEO slot to an
outsider with a stronger financial background, leaving
her to concentrate on the creative and design parts of
the business.
The board is talking to at least one headhunting firm,
which already has interviewed close to 20 candidates,
according to these people. The search firm has thus far
interviewed candidates outside the fashion business,
including executives with experience in luxury goods and
well-known brand names, according to those with
knowledge of the talks.
The search was initiated by Ms. Karan, who has met
with several of the candidates, the people said.
People familiar with the search said the board decided
early this year to look outside for someone to share the
operating responsibilities and said an appointment could
come by the third quarter or possibly sooner. Stephen
Ruzow, the company's 53-year-old chief operating
officer, isn't a contender for the CEO slot, one person
said, but would stay in his current post.
Naming a successor to Ms. Karan would send a strong
message to disgruntled investors and analysts who have
complained that the 48-year-old Ms. Karan should
focus her energies on designing and put another
executive in charge of day-to-day operations. Since the
New York-based company's high-profile initial public
offering in June 1996 at $24, the stock has fallen 50%,
closing Wednesday at $12 in composite trading on the
New York Stock Exchange.
Company officials declined to comment and said Ms.
Karan couldn't be reached.
The change at the top of Donna Karan would signal a
cultural shift inside the company, one of the only players
on Seventh Avenue whose namesake designer is also
the chief executive. Well-known for her obsession with
detail in her clothing lines, Ms. Karan was reluctant to
give up control of the fashion house she spent more than
a decade building. Since going public, Ms. Karan herself
has expressed difficulty about meshing her creativity with
the financial austerity demanded of a public company.
Problems with financial performance and cost-controls
began surfacing at the company almost immediately after
its IPO. Investors wowed by Ms. Karan's vision and
talent found her meticulous approach to design didn't
always apply to the bottom line. The company broke
apart its lower-priced DKNY line into five different
groups last year, a move that proved more costly than
expected as the company added staff and manufacturing
capacity and raised its marketing and advertising
expenditures.
Subsequently, the company reported a fourth-quarter
loss in 1996, blaming the performance on expenses,
which also included part of a $5 million ad campaign
featuring Ms. Karan's friend Demi Moore and her
husband Bruce Willis. Troubles continued to mount into
1997, as a much-ballyhooed jeans-licensing deal with
Designer Holdings Ltd. fell apart in March and Donna
Karan agreed to pay back $7.3 million.
And just last week, the company announced it would lay
off 4% of its work force, or about 53 people, and said it
will take pretax second-quarter charges totaling $5.2
million. The firm also said it plans to cut back on fashion
shows, introduce a hiring freeze, and reduce the number
of times it offers its women's designer collection to
retailers each year.
Ms. Karan told investors in a conference call last week:
"We are still a young company in a growth mode. I want
you to know I'm taking these responsibilities seriously,
and I am fully committed to delivering value to
shareholders and maintaining the integrity of this
organization." |
