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                                                                                BUSINESS, Page 54

Donna Inc.


With talent, drive and a willingness to break the rules, Donna
Karan has made a distinctive mark as a designer and built a
formidable apparel empire

By BARBARA RUDOLPH


    "Let's spray the models! Patti, could you get me some
perfume?" Straight pins bristling from her mouth, safety pins
stuck on the black cashmere sweater wrapped around her waist,
designer Donna Karan is stalking the runway where she is about
to present her spring collection to the fashion flock. She was
up for most of the night, coping with the usual crises. The
oversize linen hats, for instance. A nice theatrical touch, but
they didn't fit through the entrance to the runway. (The models
learned to take them off and put them back on, fast.) Then there
was the jewelry. Karan decided she needed more gold. Fistfuls
of silver pieces were hand-dipped in gold. All wrong. Back to
silver.

    As the models begin striding out for the show, Karan is in
constant motion behind the curtain, tucking, smoothing,
adjusting angles by an imperceptible (to anyone but her)
fraction of an inch. Nothing escapes her eye. Everything has to
be perfect. "Are you accessorized? . . . I told you I need a
beret! . . . Lynn, move the belt!" From out on the runway comes
the sound of Madonna singing her version of Peggy Lee's Fever
as each model passes through Karan's last-minute scrutiny and
touch-up. "Little black glasses! Who's next?"

    Such painstaking, relentless attention to detail, fueled
by an insatiable drive, defines everything Karan does. It has
made her the powerhouse of Seventh Avenue, the darling of the
fashion faithful, the quintessential stressed-out New York City
career woman-cum-celebrity. She is the only female interloper
in the all-boys club of leading U.S. designers, whose longtime
members are Ralph, Calvin, Bill, Geoffrey and Oscar. The future
of American retailing, though, may belong to Donna.

    In the rag trade, where rivals try to rip one another to
shreds every season and a designer is only as good as his or her
last collection, Karan's performance has been virtually
seamless. At 44, in business for herself for just eight years,
she has not only shaped a distinctively comfortable, sexy style
as a designer but has also amassed a formidable empire as a
businesswoman. Her revenues this year should reach $268 million,
up from $119 million in 1989. By 1995, with more and more sales
coming from overseas markets, revenues might top the
half-billion-dollar mark.

    Karan has tailored a full-line apparel conglomerate. There
is the Donna Karan collection for men and women,
top-of-the-line fashion ($650 for a pair of woman's pants,
$1,350 for a man's wool crepe suit). Then there is the exploding
DKNY division, which showed other designers how to sell chic
women's sportswear at relatively modest prices ($450 for a
woman's wool blazer vs. $1,100 for a comparable collection
garment). Now DKNY has been expanded to include clothes for
children and men. Karan also has licensing deals to make
hosiery, a line of intimate apparel and eyeglasses. And a few
months ago, she took the plunge into the highly competitive,
celebrity-glutted fragrance market with the launch of her Donna
Karan perfume.

    The precedent, clearly, is Ralph Lauren. Lauren
brilliantly created a multibillion-dollar kingdom by exploiting
middle-class Americans' yearning for a patrician past they never
had. As his empire grew, his vision stayed focused. No one
admires the Polo king's achievement more than Karan, whose great
ambition seems to be to repeat his success.

    She has already become an established A-list name, a
fixture at AIDS benefits and theater openings, often seen in the
company of high-profile friends like Barbra Streisand ("There's
probably no one I admire and respect more than Barbra"). Though
older friends recall a time when she was "shy and introverted"
at public functions, those days seemed long gone in September
when Karan hobnobbed with Bill and Hillary Clinton at a
Hollywood gathering. Still, Karan works too hard to spend much
time on the social scene, or even at home in her sunny
four-bedroom apartment on Manhattan's Upper East Side (lots of
suede furniture and sweeping city views) or at her East Hampton
beach house. When she travels to Italy several times a year,
Karan spends more time looking at bolts of fabric than at
Botticellis. Her world is fashion, and her place in that world
is secure.

    Some designers create beautiful fantasies, hopelessly
beyond the reach of ordinary mortals. Karan's gift is that she
makes wearable, flattering clothes for real women, whether they
are corporate lawyers, Candice Bergen or the well-heeled wives
of orthopedic surgeons. That sounds simple, but it is a rare
talent on Seventh Avenue. "No one understands a woman's body
better than Donna Karan," says Andrea Jung, executive vice
president at Neiman Marcus. Harper's Bazaar editor in chief
Elizabeth Tilberis points out that Karan's designs, unlike those
of some of her rivals, work as well for a size 10 as a size 6.
And while Lauren, say, can get away with minimal variation in
his womenswear lines from year to year, Karan's customers look
to her for a jolt of the new, season after season.

    Karan proved her talent most assuredly in her spring
womenswear collection, which she showed to the press last month.
"I loved it," says Vogue editor in chief Anna Wintour. Virtually
all the top spring collections are presenting a decidedly new
look -- soft, fluid and romantic -- but Karan and Lauren showed
the most imaginative interpretation of the change. Among the
strong sellers in Karan's line: the poet's blouse, a white
viscose creation with flared cuffs ($450); navy bell-bottom
pants ($650); and an elongated wool crepe vest ($825).

    If Karan seems right at home in the rough, insular world
of Seventh Avenue, it may be because she was born into it. Her
father Gabby Faske, who died when Donna was three, was a
tailor. Her mother Helen worked as a sales representative and
showroom model. Known in the family as "the Queen," Karan's
mother was an imperiously demanding woman. Does Karan's
childhood explain her drive? After 18 years of psychoanalysis,
Karan has either found the answer or stopped asking the
question. "I think I was born this way," she says. "I never feel
I've done it right."

    After studying at New York City's Parsons School of
Design, Karan went to work at 19 for Anne Klein, another lady
who was notoriously hard to please. "Donna idolized Annie, and
she was afraid of her," recalls Burt Wayne, head of the Anne
Klein design studio and a good friend of both women. Wayne
recalls meeting Karan for the first time when he visited Klein
at her apartment. Donna was standing on the terrace with Klein,
showing her various fabrics. "Her hair was blowing, the fabrics
were flying. You could instantly see Donna's enthusiasm -- and
her tenacity." When Klein died in 1974, Karan took over the
reins, just four years after arriving at the company. By this
time she had married her first husband, Mark Karan, a
clothing-boutique owner, and had given birth to their daughter
Gabby. Donna later divorced Karan and married sculptor Stephan
Weiss, whom she had known as a teenager.

    At Anne Klein, Karan worked with her co-designer, Louis
dell'Olio, to protect the legacy of the label while moving the
business forward. In 1983 they launched Anne Klein II, a
successful line of clothes for working women. But, ever
restless, Karan was eager to assert her creative identity.
Executives at Takiyho, the Japanese conglomerate that owned a
majority stake in Anne Klein, urged her to start her own label,
but she was uncertain. So in 1984 Takiyho fired her,
simultaneously agreeing to back her new company.

    Six months later, Karan mounted her first show. The
eternally jaded fashion crowd gave her a standing ovation,
whistling, wildly shouting her name. A month after that, she
broke records at a special sale for customers of Bergdorf
Goodman, the premier U.S. fashion retailer. Dawn Mello, then
Bergdorf's president, recalls the scene when the sale ended:
"Donna burst into tears and sat on the floor, weeping, amazed
at what she had done."

    Over the years, Karan has consistently demonstrated a
golden commercial touch, but not by taking the predictable
approach or by heeding conventional wisdom. As Vogue's Wintour
says, "Donna quite enjoys breaking the rules." Before Karan, for
example, most designers' second collections were watered-down
versions of their high-priced lines. Karan did something
entirely different when she opened her second line, DKNY, in
1989. She offered stylish, casual and affordable clothes without
cannibalizing her main collection. Under the direction of
Karan's advertising guru, Peter Arnell of the Arnell/Bickford
agency, the new line was shrewdly marketed with a portfolio of
black-and-white cityscapes that emphasized its distinctive urban
persona. Its revenues should hit $185 million this year.

    No less contrarian was Karan's approach to the hosiery
business. In 1987 the designer became convinced that women would
spend more money if they could find heavier, more opaque
pantyhose to cloak the sags that most female flesh is heir to.
The product that she and her licensee, Hanes, came up with was
nearly twice as thick and twice as expensive as usual hose.
"Everyone here thought we were on drugs," recalls Hanes vice
president Cathy Volker. But the gamble paid off. Customers
recognized the superior quality and paid for it. This year the
business is likely to gross $30 million at wholesale.

    Karan's boldest assault so far on Seventh Avenue tradition
has been her move into men's clothing. Apparel experts scoffed
at the notion of a woman designer's label inside a man's suit.
American men are too insecure, said the insiders; they'll never
accept it. Nevertheless, the first Donna Karan suits for men
rolled off the racks last year. "We spent seven years building
the name," Karan says. "The image says something." It does. Her
men's clothes, like her womenswear, are known for their comfort
and sensuality. Strong sellers include leather vests ($475) and
cashmere crewneck sweaters ($600). Last month Karan won the
prestigious Council of Fashion Designers of America award for
best men's designer of the year.

    Karan's venture into fragrance, on the other hand, may
prove to be one instance where unorthodox methods fail her.
Introducing a perfume is very expensive -- commonly around $10
million to $15 million for the first year of a no-frills
national launch -- so designers typically hire a company to
market the product and retain a small royalty (usually between
3% and 5%). But Karan and husband Weiss decided to sell her
fragrance themselves. It is available in Bloomingdale's stores
in the New York metropolitan area and through a toll-free
number. But since the public has no idea what the perfume smells
like, the 800 number has been a bust.

    Meanwhile the perfume's bottle, designed by Weiss, has
sparked controversy. The bottle resembles the back of a woman's
body and is also vaguely phallic. Says Robert Lee Morris, a
jewelry designer who worked with Karan for nine years until they
broke off their partnership four months ago: "It looks like a
ray gun." Karan has also come in for a fair amount of ribbing
for her oft-quoted comment that she wanted the fragrance to
smell like red suede, lilies and the back of her husband's neck.
(At Karan's show last month, Kal Ruttenstein, senior vice
president of Bloomingdale's, approached Weiss and said, "I want
to smell your neck!")

    This would not be the first time that Karan has stumbled,
of course. The company has confronted perennial problems with
quality control and late deliveries. Some licensing arrangements
have foundered as well. Since late 1990 the company has been
battling Erwin Pearl over the terms of Pearl's licensing
agreement to produce and sell jewelry for the DKNY line. The
dispute is in arbitration.

    Karan would be the first to admit that her professional
success has come at a real personal cost. "Looking back, it was
the most horrible pain of my life," Karan says. "When your
child says, `Don't go, stay home,' and the office is calling and
screaming, it's brutal." Now that daughter Gabby is an
18-year-old college freshman, Karan reports, "the guilt is
leaving me." Gabby describes her mother as "my best friend. I
idolize her, and I want to be like her."

    A lot of young women who work for Karan feel the same way,
much as the young Donna felt about Anne Klein. Karan attracts
talented people who are famously loyal and willing to put up
with her constant demands. The designer has been known to give
employees a ride home in her limo just to keep a conversation
going. "Donna draws you in. She's this irresistible force," says
Beth Wohlgelernter, who worked as her executive assistant for
six years. The staff, in fact, amounts to something of a Karan
cult. Says Jane Chung, the senior vice president for design at
DKNY, who has worked for Karan for 10 years: "There's no
question that everyone loves what she does and wants to dress
like her and be like her."

    Karan, fighting the constant deadlines, sometimes wonders
what there is to envy. "I do love the ability I have to create
something from nothing. What I hate is the pressure, the toll
it takes on my physical being. Do I have to pay this price to
do something I love?" The answer is yes, and she knows it.