Will the catwalk queen stumble?

Designer Donna Karan believes in reincarnation - or at least being born again on Wall Street. David Usborne reports

Donna Karan, the ageing but still oh-so-hot matron of New York's catwalks, is preparing to shed her privacy. Three years after her last, ultimately bungled, attempt at taking her highly lucrative Donna Karan International public, she is trying again. Will she get it right this time?

Ms Karan, 47, announced last month that she intends raising $230m (pounds 153m) in a flotation that is likely to be completed in June. The bulk of the proceeds will be used to retire debt and to enrich both herself and her vice-chairman - who is also her husband - Stephan Weiss.

Ms Karan's last run at the market, in 1993, was sabotaged by company infighting and disagreements over valuation. She finally withdrew the offering in a shower of embarrassing publicity. The whole experience, she reportedly told a friend later, was like "hanging out naked on Seventh Avenue", in a reference to the storied heart of Manhattan's apparel industry.

The omens this time - and the idiosyncratic Ms Karan takes note of such things - seem to be good. Recent months have seen a rush of highly successful fashion and celebrity flotations on the New York Stock Exchange. If Estee Lauder, Gucci and Planet Hollywood can carry it off, why not her?

The Donna Karan brand, meanwhile, is in sterling shape. Since breaking away from Anne Klein to start her own business in 1984, Ms Karan has established herself as a virtual cult figure among women consumers, many of whom have shown willing to spend $1,200 on her jackets and $900 on one of her sleek dresses, designed to be sexy but boardroom-appropriate.

Bolstering her business is the sizzling DKNY line of lower-end goods - from sunglasses to perfumes and children's clothes - and the rapid expansion of her empire in Europe and Asia. Last year, her prospectus says, overall revenues at the firm increased by 21 per cent to $510m while operating income rose 47 per cent to $54m. "Donna Karan's products are on fire," says Alan Millstein, a prominent New York fashion-industry consultant.

But on Wall Street, a few doubts still persist. There is, for one thing, the chronically mercurial nature of the fashion trade. Just now, Donna Karan, like Gucci, is a design house that is nicely on the boil. Body- hugging Karan silhouettes are staring out from Manhattan's billboards and the designer is riding the wave of burgeoning sales of luxury goods. But what if next year, for instance, the critics and the public turn against her?

Nor, in the meantime, is the industry as a whole faring nearly as well. As it happens, Anne Klein, was forced recently to discontinue its designer- collection division because of slumping sales.

And then there is Ms Karan herself. On the one hand, it is her fame that should give the shares an immediate lift when they are finally listed. On the other, however, there are aspects of the Karan persona - such as her distinctly New Age leanings - that might give pause to some investors.

And Ms Karan has hardly been discreet about her philosophies, which she amply laid out in an interview that appeared in the 6 May issue of New York Magazine. The article surfaced in the normally sensitive period between the filing of offering documents with the Securities and Exchange Commission (SEC) and the listing itself.

"The antics of this article obviously serve to deviate from the prospectus reading and shift the whole focus of the IPO process toward hype," David Menlow, president of the New Jersey-based IPO Financial Network group, told the New York Times last week. "There has been an increasing tendency for companies to get write-ups like this during registration, and that may precipitate attention from regulatory agencies."

Whether or not Ms Karan has crossed any legal boundaries, it is also questionable whether the image projected through the interview is altogether in line with what many investors might look for in a model chief executive. She appears on the magazine's cover draped in black velvet. Inside, she expands on reincarnation and the nature of her previous lives.

In not always coherent English, she explains: "I have experienced about seven past lives. I was very much a wanderer though the lands of the Middle East: Egypt, India. I was an artist in Florence. I painted for the Medicis. But I don't remember any sort of recognisable - like a king or a queen, any notable."

Claiming that the interview was conducted some weeks before the IPO papers were filed, Mr Millstein says that Ms Karan was "suckerpunched" by the interviewer. And the investors will come flocking anyway, he suggests. "It is irrelevant. The stock market really doesn't care about such things and there is a fever pitch right now for luxury retailers and high profile designers."