Donna Karan Posts Loss, Continues Restructuring

Donna Karan International Inc. on Monday reported a fiscal fourth-quarter loss, though the company, while conceding it faces “some major challenges,” said it is moving toward “a profitable outlook” in 1998.

The New York-based clothing designer reported a final loss of $68.4 million, or $3.17 a share, for the quarter ended Dec. 28, compared with net income of $1.04 million, or 5 cents, in the year-earlier quarter. Revenue fell 5%, to $154 million, from $162.2 million.

Donna Karan was expected to report a loss of $3.64 a share, the average estimate of three analysts surveyed by First Call Corp. Shares of Donna Karan rose 6 cents to close at $12.44 in New York Stock Exchange trading.

Donna Karan has announced several plans in recent months to help restore its business to profitability, including licensing beauty products to Estee Lauder Cos. and jeans-wear and active-wear clothing brands to Liz Claiborne Inc. In November, Donna Karan said it would cut 15% of its work force, which is expected to save about $10 million a year.

“Our financial performance in 1997 was both disappointing and unacceptable,” said Chief Executive John Idol in a statement. “We are making necessary operational changes to significantly reduce expenses and to increase sales and revenues.

The reasons for its losses include poor sales of its Donna Karan New York men’s collection and DKNY Kids line, as well as lower-than-expected sales and margins in its outlet stores. In December, Donna Karan said it faced a “continued difficult business environment” in the U.S. for its DKNY women’s line, which also suffered sales declines in Asia amid economic turmoil.

“We recognize that . . . we face some major challenges in 1998,” Idol said. “Re-energizing the DKNY women’s brand is primary among those challenges.

Donna Karan recorded charges in the fourth quarter of $7.1 million for restructuring, $23.4 million for the beauty business, $12.5 million for jeans licensing to Liz Claiborne and $13.2 million for other items.

The fourth-quarter loss before these charges and income taxes was $12 million, the company said.