Donna Karan Builds Her Dream Store

The two-story-high, graffitoed images of giant model couple Esther Canadas and Mark Vanderloo on the corner of Madison Avenue and 60th Street were dismantled the weekend of Aug. 6, their big pouty lips stripped away to expose something even more astonishing. Underneath was a big, shiny glass box, mysteriously soaped up, but promising–in lower-case neon letters–everything. Fun . Sense . Soup . Bags . Art . Life . Color . Men . Bikes . Also: Future . Chairs . Coffee . Hats . Comfort . Books . Vintage . Sound . Juice . New York . And, in bigger black type was a snappy logo: DKNY.

Walt had Disneyland. Welcome to DKNYland, the happiest place on Madison Avenue.

“You know how they always say that New York is a state of mind?” asked Donna Karan executive vice president Trey Laird. “Well, that’s what’s going to be in the store.”

Six months behind schedule, Donna Karan says she will open her first New York boutique this month, a 16,000-square-foot, three-level, whitewashed space at 655 Madison Avenue. The construction crew is there from 8 to 4 every day. Inside, stairs have been assembled, but they are rusty, unfinished; tables are covered in blueprints; white-painted floodlights and mirrors sit. It will be bright in DKNY, this is clear.

The woman who began by selling seven easy pieces to the 80’s New York career woman has wrapped up a marked-up millennial bazaar inside a fashion theme park. The store’s mission is to carry “anything of note with design integrity,” gathered by the staff of “inspirational curators” that Ms. Karan has been dispatching around the world for more than 10 years.

This store will beg you to come inside and play. To hang out, even: check your e-mail, listen to the latest club compilation. And eat soup! Quite unlike its neighbors, including the tall, cold, gray Calvin Klein store looming across the street. Where DKNY will have floor-to-ceiling windows, Calvin Klein has limestone; where she’ll have interactive merchandise, he has clothes hanging like artifacts in a museum. A few blocks north, at Giorgio Armani, there are stark lilies in vases and a guard at the door. As the rest of the city’s designers are erecting Madison Avenue retail cathedrals, she’s less about clamoring to dress people for the Oscars (although she did dress Tina Brown for the Talk launch party) than she is about pumping up her logo and lowering her prices on street wear.

But the store will be, at the very most, an oddity. It doesn’t really seem to be built for New Yorkers, who’d just as soon curate their own lives; more for Danes, Brazilians, Californians, a tourist destination. “It’s not a trend. It’s really not,” said architect Peter Marino, who designed the Giorgio Armani boutique in 1996 and a DKNY store in London in 1994. “I mean, I don’t know who’s going to be hanging out there. Maybe high school kids, but they’d hang out on a park bench.”

With Madison Avenue’s high rents and DKNY’s huge renovation costs, it’s more theme park than store. After all, you can’t really make retail space pay when you’re selling Blanche’s Organic wheatgrass juice and the occasional motorcycle jacket–both of which are taking up a lot of Ms. Karan’s floor space. But you can make the tourists remember who you are, all the way back to other Karan-selling retail outlets, which have been a goal of John Idol, the new chief executive hired in 1997: New shops have popped up in high-end shopping spots like Manhasset, L.I., Las Vegas, Boston, Denver.

When you enter through the double-height glass doors on Madison, you will come into a consumer’s fun house with Apple Imacs, mini Polaroids, racks of CDs next to CD listening stations (“tribal to techno, classical to house”), “artisan curios,” like a big, chalky vase from Holland, DKNY polar fleece blankets, scented pillows, lots of big glossy design books.

There will also be yoga classes.

Upstairs, when you mount an eerie, free-floating staircase, you’ll enter Blanche’s Organic Cafe and discover racks of vintage clothing–or in Karanspeak, “soulful” objects, and DKNY women’s wear.

Downstairs, rumply linen separates for men, a macho Ducati motorcycle display with a limited-edition line of Donna Karan motorcycle wear and, making its debut, Ducati’s new Monster Dark.

“It’s a living, breathing life-style infomercial,” said Paco Underhill, retail analyst. Donna Karan has anointed herself New York City’s personal cool-hunter. That is, you can purchase that rock that gave her a season’s color scheme. Donna’s taste can be your taste. If you want it.

“What we’re dressing,” said Trey Laird, “are people’s lives.”

Donna Fires Herself

Putting her life style in a showroom has been classic Donna Karan. When Ms. Karan started her own label in 1985, she was a working mother interested in simple styles. Now she’s Donna Karan Inc., the embodiment of a public company that has been both creatively successful and financially embattled. As for Ms. Karan herself, she has developed from the cheeky Seventh Avenue diva who revolutionized design among working women to an executive who–like Martha Stewart and Ralph Lauren–has a bigger message. She stretches and bends and attends spiritual sessions with her guru, Tesh, and her daughter Gabby is on the payroll.

On Aug. 10, Donna Karan reported its earnings for the quarter ending July 4. They lost more this year than during the same period last year, but according to Mr. Idol, they’re right on track. “Overall performance was consistent with our plan for a slight increase in the second-quarter loss compared to last year.” Nonetheless, the stock inched up a drop to 7[9/16], though it’s still a far cry from its 52-week high of 15[5/8]. Not strange, perhaps, for an Internet startup, but certainly eyebrow-raising for a mature retail company.

Donna Karan was founded in 1985 by Ms. Karan and her husband Stephan Weiss after Ms. Karan left Anne Klein, where she’d been head designer for 10 years. Things went well, as her bodysuits and knee-length black crepe blazers embodied a certain 80’s moment. Then, there was a failed beauty line, launched in 1992 and licensed to Estée Lauder in 1997 and a failed initial public offering in 1993.

In 1996, Ms. Karan finally rang the bell at the New York Stock Exchange, looking not unlike the fictional female President of the United States who had embodied her well-regarded 80’s advertising campaign. The stock rose for a minute, from 24 to 28. Then it went splat, and there was a very un-Karan-like big mess. Angry stockholders protested the arrangement Ms. Karan had made at the time of the I.P.O. in which she and Stephan Weiss created a holding company, called Gabrielle Studio, and gave it ownership of some of the Donna Karan trademarks, then leased them back to the company, taking a percentage off the top of all profits. Even though Donna Karan had been performing poorly, and Ms. Karan had gone without annual bonuses, she and Mr. Weiss, as the owners of Gabrielle Studio, were making lots of money: The licensing company earned $19.5 million in profits in 1998, when her retail business logged an operating loss of $16.1 million.

In response, Mr. Karan fired herself as chief executive of Donna Karan International in 1997, and hired John Idol, a former group president of product licensing from Polo Ralph Lauren, to cut costs and clean shop. As a result, 15 percent of Donna Karan employees lost their jobs. That same year, Ms. Karan signed the lease for the megastore. Then last October, she signed another for the former 7,000-square-foot Versace boutique on Madison Avenue between 68th and 69th streets.

In 1997, she also signed a lease on an apartment on Central Park West, which she laboriously redecorated. But earlier this year, their landlord decided to keep the apartment for himself, and the couple was forced to undo the work they put into it and hole up in another rental apartment in SoHo. They recently looked at Woody Allen’s Fifth Avenue, which is on the market for $15 million.

Donna is Constantly Bubbling Ideas

The designer shopped around for retail space “literally for years,” said Laura Pomerantz, who helped brokered the deal. After losing out to Hermès on the former Limited store on the corner of Madison Avenue and 62nd Street, she finally found the corner of Madison and 60th Street in the spring of 1997 and signed a 15-year lease for about $2 million per year. The landlord of 655 Madison Avenue agreed to lease her space occupied by two shoestores and the building’s lobby; the entrance had to be moved around the corner to 60th Street. Ms. Karan first predicted the store would open in February 1999.

Ms. Karan’s in-house team, headed up by Mr. Laird, worked with the TriBeCa firm Architecture Project, which created DKNY’s store-within-a-store at Saks Fifth Avenue. “We’ve taken a raw space,” said Mr. Laird, “and then combined it with a very clean, modern counterpart. Anywhere you look, you see the street.”

The closest thing to it is the DKNY store in London, which was designed by Peter Marino in 1994. “Donna’s constantly bubbling ideas which, very often, are contradictory,” said Mr. Marino. “And you’ll say, ‘Uh … Donna?’ And she’ll say, ‘Oh, but I know that!’ It’s constantly bubbling up and coming out at you, a million and 500 billion ideas a second, and it’s usually nontangential thinking. She has no shutters on her eyes, she has no fenders, no screens. It just comes right out. She just doesn’t hold back. It’s ‘Here’s another 462 ideas.’

“It’s not that she changes her mind. Is there a difference between somebody who changes her mind and someone who constantly has new ideas? It’s, ‘Here’s some more ideas!’ It’s not like, ‘My last idea was bad.’ It is hard to physically architecturalize so many ideas.”

S. Russell Groves, an architect who has worked with Ms. Karan on smaller projects in the past, had the same experience.

“You definitely had to keep on your toes,” he said. “Sometimes her ideas didn’t quite fit into the schedule.”

The London store has yet to make a profit, and there’s still a lot of chin scratching at some of the company’s spending maneuvers: witness a 128-page advertising supplement to the Vanity Fair Hollywood issue in April in which DKNY models Esther Canadas and Mark Vanderloo frolicked around the city with a crew of new age, New York-y friends. Exactly the types, the company hopes, who can’t wait to get their New Balance-d feet inside the doors at 655 Madison.

“Any kind of mixed life experience works very well for Donna,” said Mr. Marino. “Does it actually add to the business? I don’t know. It suits her personality. Most major retailers are much more focused now. I think everybody’s been chastened by the very big bankruptcies that have happened in the industry, like Charivari and Barneys.

“When I was doing Barneys, it was so de rigueur that you had to have a minimum of two or three restaurants or you couldn’t open up a department store. You just couldn’t. But then they figured out the synergy doesn’t work, that if you go there for lunch you’re rushed and harried, and you don’t go, ‘Oh, when I go for lunch I think I’ll also shop and buy a $600 blouse.'”

Donna Makes Us Wait

With a lot of frenetic drive and sweat, DKNY is pounding toward an August opening.

In the meantime, the word stickers on Madison Avenue are getting a lot of curious looks. But not from the security guard posted beneath the scaffolding. “It’s the things she’s gonna be selling,” he said, gesturing toward “sense,” “sexy,” “jeans.”

“Me?” he continued. “I adore her wardrobe. I’ve got a pair of Donna Karan sneakers.” He gestured towards his feet. “Cost me a buck fifty.”