<Page>

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                           --------------------------

                                    FORM 10-Q

                           --------------------------

           |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2001

                                       OR

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 1-11805



                         DONNA KARAN INTERNATIONAL INC.
             (Exact name of registrant as specified in its charter)

               Delaware                                   13-3882426
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)

                  550 Seventh Avenue, New York, New York 10018
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (212) 789-1500
              (Registrant's telephone number, including area code)

                           --------------------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES |X| NO |_|

At November 9, 2001, the Registrant had 22,266,483 shares of Common Stock
outstanding.*

*Does not include 18 shares of Class A Common Stock, par value $.01 per share,
and two shares of Class B Common Stock, par value $.01 per share, outstanding as
of such date.



================================================================================

<Page>

                         DONNA KARAN INTERNATIONAL INC.

                                     INDEX

<Table>
<Caption>

                                                                                                                  PAGE
<S>                                                                                                                <C>
PART I.       FINANCIAL INFORMATION

Item 1.    Financial Statements

           Statements of Operations and Comprehensive (Loss) Income
                Three months and nine months ended September 30, 2001 and October 1, 2000.............               3

           Balance Sheets--
                September 30, 2001 and December 31, 2000..............................................               4

           Statements of Cash Flows--
                Nine months ended September 30, 2001 and October 1, 2000..............................               5

           Notes to Financial Statements..............................................................               6

Item 2.    Management's Discussion and Analysis of
                Financial Condition and Results of Operations.........................................              15

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.................................              22


PART II.      OTHER INFORMATION

Item 6.    Exhibits and Reports on Form 8-K...........................................................              22
</Table>





                                        2
<Page>

                         DONNA KARAN INTERNATIONAL INC.

            STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
                                   (UNAUDITED)

<Table>
<Caption>

                                                               THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                         ------------------------------      ------------------------------
                                                         SEPTEMBER 30,      OCTOBER 1,       SEPTEMBER 30,       OCTOBER 1,
                                                             2001              2000              2001              2000
                                                         ------------      ------------      ------------      ------------
                                                                      (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                      <C>               <C>               <C>               <C>
NET REVENUES .......................................     $    177,226      $    203,741      $    474,213      $    497,024
Cost of sales ......................................          123,302           131,093           338,666           336,073
                                                         ------------      ------------      ------------      ------------

GROSS PROFIT .......................................           53,924            72,648           135,547           160,951
Selling, general and administrative expenses .......           57,923            47,922           153,132           141,863
Restructuring credit ...............................               --                --                --              (200)
                                                         ------------      ------------      ------------      ------------

OPERATING (LOSS) INCOME ............................           (3,999)           24,726           (17,585)           19,288
Interest expense, net ..............................            1,264             1,032             3,109             1,785
                                                         ------------      ------------      ------------      ------------


(LOSS) INCOME BEFORE INCOME TAXES ..................           (5,263)           23,694           (20,694)           17,503
Income tax provision ...............................           48,454             9,714            42,436             7,176
                                                         ------------      ------------      ------------      ------------


NET (LOSS) INCOME ..................................          (53,717)           13,980           (63,130)           10,327
                                                         ------------      ------------      ------------      ------------

Other comprehensive (loss) income, before tax:
Foreign currency translation .......................                3               (12)               (7)             (139)
Unrealized loss on forward exchange contracts, net .           (7,461)               --            (4,286)               --
                                                         ------------      ------------      ------------      ------------

Other comprehensive loss, before tax ...............           (7,458)              (12)           (4,293)             (139)

Income tax benefit on other comprehensive income ...           (2,910)               --            (1,672)               --
                                                         ------------      ------------      ------------      ------------
Other comprehensive loss, net of tax ...............           (4,548)              (12)           (2,621)             (139)

COMPREHENSIVE (LOSS) INCOME ........................     $    (58,265)     $     13,968      $    (65,751)     $     10,188
                                                         ============      ============      ============      ============

   Net loss per common share:
     Basic .........................................     $      (2.48)     $       0.65      $      (2.92)     $       0.48
                                                         ============      ============      ============      ============
     Diluted .......................................     $      (2.48)     $       0.63      $      (2.92)     $       0.47
                                                         ============      ============      ============      ============

   Weighted average common shares outstanding:
     Basic .........................................       21,635,091        21,605,700        21,627,806        21,604,100
                                                         ============      ============      ============      ============

     Diluted .......................................       22,430,421        22,170,700        22,387,849        22,036,200
                                                         ============      ============      ============      ============
</Table>



                        SEE NOTES TO FINANCIAL STATEMENTS

                                        3
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                                 BALANCE SHEETS

<Table>
<Caption>

                                                             SEPTEMBER 30,   DECEMBER 31,
                                                                 2001           2000
                                                             ------------    -----------
                                                              (UNAUDITED)
                                                                   (IN THOUSANDS)
<S>                                                            <C>            <C>
ASSETS

CURRENT ASSETS
     Cash and cash equivalents ...........................     $   4,208      $  15,535
     Accounts receivable, net of allowances of $31,612
        and $36,178 respectively .........................        98,419         85,007
     Inventories .........................................       104,704         88,691
     Deferred income taxes ...............................            --         28,297
     Prepaid expenses and other current assets ...........        29,092         27,920
                                                               ---------      ---------
        TOTAL CURRENT ASSETS .............................       236,423        245,450
Property and equipment, net ..............................        38,928         38,987
Deferred income taxes ....................................            --         19,650
Deposits and other noncurrent assets .....................        22,518         20,127
                                                               ---------      ---------

                                                               $ 297,869      $ 324,214
                                                               =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable ....................................     $  69,419      $  76,956
     Accrued expenses and other current liabilities ......        49,614         57,501

     Borrowing under revolving line of credit ............        57,541             --

     Subordinated notes payable ..........................         8,209             --
                                                               ---------      ---------
        TOTAL CURRENT LIABILITIES ........................       184,783        134,457
                                                               ---------      ---------

Subordinated notes payable ...............................            --          8,209

Deferred income ..........................................        25,049         28,688

STOCKHOLDERS' EQUITY
     Common stock, $0.01 par value, 35,000,000 shares
        Authorized, issued and outstanding 22,266,483 and
        22,127,805 respectively ..........................           223            221
     Common stock Class A, $0.01 par value, 18 shares
        Authorized, issued and outstanding ...............            --             --
     Common stock, Class B, $0.01 par value, 2 shares
        Authorized, issued and outstanding ...............            --             --
     Preferred stock, $0.01 par value, 1,000,000 shares
        Authorized, no shares issued and outstanding .....            --             --
     Additional paid-in capital ..........................       193,549        192,348
     Retained deficit ....................................       (97,654)       (34,524)
     Accumulated other comprehensive income (loss) .......        (5,708)        (1,415)
                                                               ---------      ---------
                                                                  90,410        156,630
     Less:  Treasury stock, at cost (16,270 shares) ......          (384)          (384)
            Unearned compensation ........................        (1,989)        (3,386)
                                                               ---------      ---------
         TOTAL STOCKHOLDERS' EQUITY ......................        88,037        152,860
                                                               ---------      ---------
                                                               $ 297,869      $ 324,214
                                                               =========      =========
</Table>

                        SEE NOTES TO FINANCIAL STATEMENTS


                                       4
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<Table>
<Caption>

                                                                   NINE MONTHS ENDED
                                                              -------------------------
                                                              SEPTEMBER 30,  OCTOBER 1,
                                                                  2001          2000
                                                              ----------      --------
                                                                    (IN THOUSANDS)
<S>                                                             <C>           <C>
OPERATING ACTIVITIES
Net (loss) income .........................................     $(63,130)     $ 10,327
Adjustments to reconcile net (loss) income to net cash used
   for operating activities:
    Depreciation and amortization .........................       11,921        10,043
    Amortization of deferred income .......................       (6,055)      (10,458)
    Provision for bad debts ...............................          763          (119)
    Deferred income taxes .................................       47,947         2,190
    Provision for restricted stock compensation ...........        2,409           249
Changes in operating assets and liabilities:
    Increase in accounts receivable .......................      (12,846)      (22,596)
    (Increase) decrease in inventories ....................      (16,013)        9,520
    Increase in prepaid expenses and other
           current assets .................................       (2,501)       (3,989)
    Increase in deposits and other noncurrent assets ......       (8,017)       (5,637)
    (Decrease) increase in accounts payable, accrued
           expenses, and other current liabilities ........      (13,660)          876
    Decrease in deferred income ...........................       (3,639)       (4,287)
                                                                --------      --------
       NET CASH USED FOR OPERATING ACTIVITIES .............      (62,821)      (13,881)
                                                                --------      --------

INVESTING ACTIVITIES
    Purchase of property and equipment, net ...............       (6,236)       (3,825)
                                                                --------      --------
       NET CASH USED FOR INVESTING ACTIVITIES .............       (6,236)       (3,825)
                                                                --------      --------

FINANCING ACTIVITIES
    Net proceeds of revolving credit facility .............       57,541         9,460
    Proceeds from stock options exercised .................          189            --
                                                                --------      --------
       NET CASH PROVIDED BY FINANCING ACTIVITIES ..........       57,730         9,460
                                                                --------      --------

    NET DECREASE IN CASH AND CASH EQUIVALENTS .............      (11,327)       (8,246)
    CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ......       15,535        15,038
                                                                --------      --------

    CASH AND CASH EQUIVALENTS AT END OF PERIOD ............     $  4,208      $  6,792
                                                                ========      ========
</Table>








                        SEE NOTES TO FINANCIAL STATEMENTS


                                       5
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The accompanying unaudited consolidated financial statements include
the results of operations of Donna Karan International Inc. and its subsidiaries
(collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated in consolidation.

         On December 18, 2000, the Company announced that it had received a
proposal from a corporation owned by LVMH Moet Henessey Louis Vuitton Inc., a
Delaware corporation ("LVMH") and a subsidiary of LVMH Moet Henessey Louis
Vuitton, S.A., a French corporation, to enter into merger negotiations (the
"LVMH Merger Offer") to acquire all of the outstanding shares of common stock of
the Company for a price of $8.50 per share in cash. On April 2, 2001, the
Company and LVMH announced that they had entered into an Agreement and Plan of
Merger, dated as of March 31, 2001 (as amended, the "Merger Agreement"), which
sets forth the terms and conditions of the proposed acquisition of the Company
by LVMH. Pursuant to the Merger Agreement, an indirect subsidiary of LVMH will
be merged with and into the Company (the "Merger") and the Company will survive
the Merger as an indirect subsidiary of LVMH. The Merger Agreement provides that
the stockholders of the Company will receive $10.75 in cash for each share of
common stock of the Company. The Merger is subject to the approval of the
stockholders of the Company and the satisfaction of other customary closing
conditions, including the receipt of required regulatory approvals. The
stockholders' meeting to vote on the approval and adoption of the Merger
Agreement and the Merger is scheduled to be held on November 27, 2001. If
stockholders' approve and adopt the Merger Agreement and the Merger, it is
expected that the Merger will be completed as soon as practicable after the
stockholders' meeting. Concurrently with the execution of the Merger Agreement,
stockholders who collectively beneficially own approximately 46.8% of the
Company's outstanding common stock entered into voting agreements with LVMH.
Under the terms of these voting agreements, these stockholders have agreed to
vote all shares of common stock, that they beneficially own, in favor of the
adoption of the Merger Agreement and the approval of the Merger. In addition,
these stockholders have also agreed, among other things, to vote against any
other transaction the consummation of which could reasonably be expected to
prevent or materially delay the Merger. During the three and nine month periods
ended September 30, 2001, the Company incurred $8.2 million and $10.5 million,
respectively, in expenses related to the LVMH Merger Offer, which have been
classified as selling, general and administrative expenses. These amounts
include for the three month period ended September 30, 2001, $6.3 million in
severance and $1.2 million in accelerated restricted stock amortization, both
related to the resignation of the Company's former chief executive officer (see
"Recent Developments" below), $600,000 in legal and accounting fees, and
$100,000 in other merger related expenses, and for the nine month period ended
September 30, 2001, $6.3 million in severance and $1.2 million in accelerated
restricted stock amortization, both related to the resignation of the Company's
former chief executive officer, $1,928,000 in legal and accounting fees, a net
$500,000 accrual related to the putative class action suits described below
under "Commitments and Contingencies," $150,000 in special committee fees, a
special bonus of $150,000 payable to an executive officer, and $272,000 in other
merger related expenses.

         The unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. On a quarterly basis, the Company's operations
may vary as a result of, among other things, production and shipping schedules,
the introduction of new products, the timing of opening and closing
Company-owned retail stores, and variations in the timing of certain holidays
from year to year. The results of operations for any interim period are not
necessarily indicative of the results of operations to be expected for a full
year. For further information, refer to the consolidated financial statements
and accompanying footnotes included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2000.

         Certain amounts in the financial statements of prior years have been
reclassified to conform to the current year presentation.

                                       6
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                          NOTES TO FINANCIAL STATEMENTS

RECENT DEVELOPMENTS

      The Company's results of operations in the second and third quarters of
fiscal 2001, having been affected by business and economic conditions, are below
forecast and are expected to continue below forecast for the balance of the
fiscal year. In August 2001, the Company entered into an agreement with
Gabrielle Studio, Inc. (an LVMH affiliate) pursuant to which Gabrielle Studio,
Inc. agreed to defer until June 30, 2002 the payment of royalties owed by the
Company for the second, third and fourth quarters of 2001. In August 2001, the
Company also amended its credit facility. The August 2001 credit facility
amendment provides (i) that an event of default will occur on January 7, 2002 if
the Merger with LVMH has not occurred, (ii) for changes in the application of
credit facility covenant calculations so as to exclude from such calculations,
the royalty payments deferred by the above referenced agreement with Gabrielle
Studio, Inc., together with certain unpaid severance and merger expenses, and
(iii) that the Company must maintain a minimum of $20 million in availability
under the credit facility from December 15, 2001 through the expiration of the
credit facility. In October 2001, the Company further amended its credit
facility. The October amendment, while waiving the need for the Company to meet
certain financial covenants as of the end of the third quarter, also reduced the
amount the Company can borrow under the facility to $102 million for the month
of November 2001, $90 million for the period from December 1, 2001 through
December 14, 2001 and $85 million thereafter. It also requires that the Company
maintain a minimum credit availability of $4 million for the period from October
22, 2001 through October 31, 2001, $8 million for the period from November 1,
2001 through November 14, 2001, and $11 million for the period from November 15,
2001 through December 14, 2001, in addition to the $20 million requirement for
the period subsequent to December 14, 2001 that was contained in the August
amendment. In addition to the October 2001 and August 2001 credit facility
amendments, in June 2001 the Company also entered into an amendment of its
credit facility which enabled the Company to borrow amounts in excess of its
calculated borrowing base during the months of June, July and August 2001. The
Company believes that its results of operations for the balance of the fiscal
year will cause it to violate several year-end financial covenants of its most
recently amended credit facility. The failure of the Merger with LVMH to close
by January 7, 2002 will cause an event of default under the credit agreement.
The Company believes that the Merger will occur prior to January 7, 2002, and if
not, that it will be required to amend its existing credit facility (which
expires May, 2003), or obtain an alternate source of long-term financing.
However, there can be no assurances that an amended credit facility or any new
financing will be available and, if available, that the terms will be as
favorable as the existing terms in the current credit facility.

      Effective as of July 13, 2001, John D. Idol resigned as Chief Executive
Officer and a director of the Company and Giuseppe Brusone, the former Senior
Vice President, Acquisitions and Brand Development of the LVMH Fashion Group,
was appointed President and Chief Executive Officer of the Company. However, Mr.
Idol will continue as an employee of the Company until the earlier of (1)
November 15, 2001 and (2) the closing of the Merger, and in that capacity will
assist and advise the Company's board of directors in connection with the
Company's transition to a new Chief Executive Officer and the Merger. In
exchange for these services, Mr. Idol will receive a monthly salary of $5,000,
but will not be entitled to any other compensation, benefits or severance
payments except as specified below.

      Mr. Idol is entitled to receive the following payments and benefits in
connection with his resignation, consistent with the intent of his employment
agreement as amended:

o     $6.3 million, consisting of (1) $5.1 million, which represents the sum of
      three times his current base salary plus three times his total bonus
      compensation for fiscal 2000, (2) a transaction bonus of $0.75 million and
      (3) $0.4 million, which represents his pro-rated performance bonus for
      fiscal 2001. These amounts are payable on the earlier of (A) November 15,
      2001 and (B) the closing of the Merger, and have been expensed during the
      quarter ended September 30, 2001.

o     Full vesting of all 548,503 unvested shares of restricted common stock he
      holds. These shares of restricted common stock will vest on the earlier of
      (1) November 15, 2001 and (2) the closing of the Merger. However, these
      shares will not vest if Mr. Idol voluntarily terminates his employment or
      is terminated for cause prior to the earlier of (A) November 15, 2001 and
      (B) the closing of the Merger. Under a separate agreement between LVMH

                                       7
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                          NOTES TO FINANCIAL STATEMENTS

and Mr. Idol, LVMH has agreed that, if the Merger is not consummated by November
15, 2001, LVMH will purchase on that date Mr. Idol's shares of restricted common
stock at a price of $4.875 per share in cash, for an aggregate purchase price of
$2.7 million. If the Merger is consummated after November 15, 2001, Mr. Idol
will be entitled to receive from LVMH or its affiliates, within five days of
consummation, an amount per share equal to the difference between (1) the $10.75
per share Merger consideration and (2) the $4.875 per share previously paid to
him, for an aggregate purchase price $5.9 million. This will result in Mr. Idol
receiving the full $10.75 per share Merger consideration for his shares of
restricted common stock, for total consideration of $5.9 million. The Company
recognized $1.4 million of compensation expense related to these shares during
the three month period ended September 30, 2001, and will recognize an
additional $0.8 million during the fourth fiscal quarter of 2001.

o     Continued health, long-term disability and life insurance at the level in
      effect on July 13, 2001 for 36 months, or the economic equivalent of that
      coverage in cash. However, if Mr. Idol commences other full-time
      employment that offers substantially similar or improved coverage, this
      continued coverage will cease.
o     Outplacement services, up to $50,000, for a period of one year, commencing
      on July 13, 2001, but in no event beyond the date on which Mr. Idol
      commences other full-time employment.
o     Any salary and expenses that are accrued but unpaid as of July 13, 2001.

Accordingly, under these arrangements, Mr. Idol will receive a total of $12.2
million, plus continued health, long-term disability and life insurance. Of this
amount, (1) $6.3 million is payable by the Company under Mr. Idol's resignation
arrangement and (2) $5.9 million is payable by LVMH under its separate agreement
with Mr. Idol relating to LVMH's purchase of his shares of restricted common
stock. Payment of these amounts to Mr. Idol is not contingent upon the
consummation of the Merger, except for LVMH's payment to Mr. Idol of $5.9
million in respect of his shares of restricted common stock. In addition, if the
payments and benefits relating to Mr. Idol's resignation arrangement are subject
to the 20% excise tax under the Internal Revenue Code of 1986 as "excess
parachute payments," Mr. Idol will receive a tax gross-up so that he is in the
same after-tax position as if there were no excise tax.

      In connection with the resignation of Mr. Idol and the appointment of Mr.
Brusone as the President and Chief Executive Officer, the Company agreed that
Mr. Brusone will, for the period prior to the consummation of the Merger, be
entitled to receive a monthly salary of $58,333.33 plus a discretionary bonus
and participate, when eligible, in all plans and benefits generally given to the
Company's senior executives. During this interim period, Mr. Brusone's
employment will be "at will," terminable by either the Company or him with or
without cause.

ADOPTION OF NEW ACCOUNTING STANDARDS

      In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, which is required to be adopted in fiscal years
beginning after June 15, 2000. The Company has adopted the provisions of this
Statement effective January 1, 2001. This Statement requires that all
derivatives be recorded in the balance sheet as either an asset or liability
measured at fair value and that changes in fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. If the derivative is
a hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company's cumulative effect of adoption of this
Statement was not material to the Company's results of operations or financial
condition. The transition adjustment from adopting this Statement resulted in
reclassifying a cumulative unrecognized loss of $0.9 million from accrued
expenses to other comprehensive income.

      The Company uses derivative financial instruments for the purpose of
managing its exposure to adverse fluctuations in foreign currency exchange
rates. The Company conducts business in many foreign currencies. As a result, it
is subject to foreign currency exchange rate risk due to the effects that
foreign exchange rate movements of these currencies have on the Company's costs
and cash flows. The Company addresses its risks through a program of risk
management that includes the use of derivative financial instruments, the
principal objective of which is to minimize the effect of foreign exchange rate
movements on the Company's operating activities.


                                       8
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                          NOTES TO FINANCIAL STATEMENTS

      The Company enters into forward exchange contracts to hedge foreign
currency denominated sales and inventory purchases, and the resulting accounts
receivable and payable. Such forward exchange contracts are for periods
consistent with the identified exposures. These contracts are effective hedges
of these exposures, and are designated as dual-purpose hedges -- cash flow
hedges until the anticipated transaction occurs, and fair value hedges until the
related receivable or payable settles. As cash flow hedges, changes in the
effective portion of the fair value of these forward contracts are included in
other comprehensive income and recognized in revenues and cost of sales, as
applicable, when the underlying hedged transaction occurs. Once the sale or
inventory purchase occurs, gains and losses on the fair value hedge of the
resulting asset or liability are recognized in other income and expense and are
offset by gains and losses on the mark-to-market of the underlying receivable or
payable. Foreign currency transactions that do not qualify as hedges are
marked-to- market on a current basis with gains and losses recognized through
income and reflected in operating expenses. In addition, any previously deferred
gains and losses on hedges that are terminated prior to the transaction date are
recognized in current income when the hedge is terminated. The contracts have
varying maturities with none exceeding 24 months. Included in other
comprehensive income is a net unrealized loss of $4.3 million related to forward
contracts outstanding as of September 30, 2001.

      As a matter of policy, the Company enters into forward exchange contracts
with parties that are major international banks and financial institutions that
have at least an "A" (or equivalent) credit rating. The Company's exposure to
credit loss in the event of nonperformance by any of the counterparties is
limited to only the recognized, but not realized, gains attributable to the
contracts. Management believes risk of loss is remote and in any event would be
immaterial.

NET LOSS PER COMMON SHARE

      In accordance with the requirements of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share," net loss per common share
amounts ("basic EPS") were computed by dividing net loss by the weighted average
number of common shares outstanding and contingently issuable shares (which
satisfy certain conditions) and excluded any potential dilution. Net loss per
common share amounts assuming dilution ("diluted EPS") were computed by
reflecting potential dilution from the issuance of restricted stock and the
exercise of stock options. SFAS No. 128 requires the presentation of both basic
EPS and diluted EPS on the face of the statements of income.

      A reconciliation between the numerators and denominators of the basic and
diluted EPS computations for net (loss) income is as follows:

<Table>
<Caption>
                                                            THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                     ------------------------------     ------------------------------
                                                     SEPTEMBER 30,       OCTOBER 1,     SEPTEMBER 30,       OCTOBER 1,
                                                         2001              2000             2001              2000
                                                     ------------      ------------     ------------      ------------
                                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>               <C>              <C>               <C>
NUMERATOR:
Net (loss) income attributable to common stock .     $    (53,717)     $     13,980     $    (63,130)     $     10,327
                                                     ============      ============     ============      ============

DENOMINATOR:
Weighted average common shares outstanding -
   Basic .......................................       21,635,091        21,605,700       21,627,806        21,604,100
Effect of dilutive securities: stock options and
    Restricted stock ...........................          795,330           565,000          760,043           432,100
                                                     ------------      ------------     ------------      ------------

Weighted average common shares outstanding -
   Diluted .....................................       22,430,421        22,170,700       22,387,849        22,036,200
                                                     ============      ============     ============      ============
Basic EPS ......................................     $      (2.48)     $       0.65     $      (2.92)     $       0.48
                                                     ============      ============     ============      ============
Diluted EPS ....................................     $      (2.48)     $       0.63     $      (2.92)     $       0.47
                                                     ============      ============     ============      ============
</Table>

                                       9
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                          NOTES TO FINANCIAL STATEMENTS

INVENTORIES

      Inventory is stated at the lower of cost or market, with cost being
determined on the first-in, first-out method.

      Inventories consist of the following:

<Table>
<Caption>
                                                 SEPTEMBER 30,         DECEMBER 31,
                                                     2001                 2000
                                                   --------             --------
                                                          (IN THOUSANDS)

<S>                                                <C>                  <C>
Raw materials ........................             $  4,881             $  3,522
Work in process ......................                3,379                3,920
Finished goods .......................               96,444               81,249
                                                   --------             --------
                                                   $104,704             $ 88,691
                                                   ========             ========
</Table>

PROPERTY AND EQUIPMENT

      Property and equipment are carried at cost less accumulated depreciation.
Depreciation is computed primarily on the straight-line basis over the estimated
useful lives of the assets ranging from 5 to 7 years. Leasehold improvements are
amortized on a straight-line basis over the shorter of the expected useful lives
or the lease term, which in certain instances include the anticipated renewal
period.

      Property and equipment consist of the following:

<Table>
<Caption>
                                                   SEPTEMBER 30,      DECEMBER 31,
                                                       2001              2000
                                                   ------------       -----------
                                                          (IN THOUSANDS)

<S>                                                  <C>               <C>
Machinery, equipment, and fixtures .........         $ 32,378          $ 29,688
Leasehold improvements .....................           66,905            63,359
                                                     --------          --------
                                                       99,283            93,047
Less accumulated depreciation ..............          (60,355)          (54,060)
                                                     --------          --------
                                                     $ 38,928          $ 38,987
                                                     ========          ========
</Table>

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

      Accrued expenses and other current liabilities are comprised of the
following:

<Table>
<Caption>
                                                  SEPTEMBER 30,   DECEMBER 31,
                                                      2001           2000
                                                  ------------    -----------
                                                        (IN THOUSANDS)
<S>                                                 <C>            <C>
     Accrued operating expenses ............        $ 7,072        $10,769
     Unearned revenues .....................          4,865          7,367
     Accrued royalties .....................         20,816         12,920
     Accrued compensation ..................          5,625         12,712
     Accrued income taxes ..................             --          6,868
     Accrued merger related costs ..........          8,555          2,400
     Accrued restructuring and other charges            602            892
     Accrued taxes other than income taxes .          1,864          2,671
     Other .................................            215            902
                                                    -------        -------
                                                    $49,614        $57,501
                                                    =======        =======
     </Table>


                                       10
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                          NOTES TO FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES

      In December 2000, several putative class actions were filed in state court
in Delaware and New York (collectively, the "LVMH Actions") in connection with
the offer of LVMH to acquire the outstanding shares of the Company for a price
of $8.50 per share (the "LVMH Offer"). All of the complaints name the Company,
its Chairman, its former Vice Chairman and its former Chief Executive Officer as
defendants. Two of the complaints also name the Company's outside Board members
as defendants and three of the complaints also name LVMH as a defendant.

      The LVMH Actions allege, INTER ALIA, that the $8.50 price initially
offered by LVMH to purchase the Company's common stock is inadequate, that the
individual defendants breached their fiduciary duties in connection with the
LVMH Offer and that the Chairman and former Vice Chairman of the Company
furthered their own interests, at the expense of the Company's interests, in
allegedly negotiating with LVMH concerning the proposed sale of the Company to
LVMH.

      These actions sought injunctive relief against the acquisition of
Gabrielle Studio by LVMH and the Merger, monetary damages and an award of
plaintiffs' costs and attorneys' fees. Plaintiffs did not file a motion for a
preliminary injunction. None of the lawsuits specifies any amount of damages
sought and, therefore, it is not practicable to estimate a range of possible
loss in connection with this litigation.

      As of May 11, 2001, all parties to the class actions filed in Delaware
entered into a memorandum of understanding setting forth an agreement in
principle for the proposed settlement of all of the actions. Under the
memorandum of understanding:

      o     LVMH acknowledged that the existence and prosecution of the actions
            and the positions advocated by plaintiffs' counsel and financial
            advisor were among the factors taken into consideration in
            increasing the per share consideration offered to our stockholders
            from $8.50 per share to $10.75 per share;
      o     The members of the special committee of the Company's board of
            directors acknowledged that the special committee was aware of the
            actions and the views of plaintiff's counsel and financial advisor
            concerning the adequacy of the $10.75 per share price offered by
            LVMH in reaching the special committee's final determination to
            recommend that our board of directors enter into the merger
            agreement; and
      o     The Company and LVMH agreed to provide a draft of the Merger proxy
            statement to plaintiffs' counsel for its review and to consider any
            comments provided by plaintiffs' counsel concerning the adequacy of
            the disclosures contained in the proxy statement.

      The proposed settlement contemplated in the memorandum of understanding is
subject to a number of conditions, including consummation of the Merger,
completion of confirmatory discovery by plaintiffs' counsel and final approval
by the Delaware Court of Chancery. Counsel for the parties in the class actions
filed in New York have stipulated to stay all proceedings in those actions and
to be bound by the outcome of the class actions filed in Delaware. Accordingly,
an order of the Delaware Court of Chancery approving the settlement will be
binding on all of the class actions in New York and Delaware. If the Court
approves the proposed settlement, plaintiffs' counsel intends to apply to the
Court for an award of fees and expenses. Defendants have agreed not to oppose
such an application in an aggregate amount not to exceed $925,000, to be paid by
the Company or the Company's successor(s) in interest in the amount awarded by
the Court. During the nine month period ended September 30, 2001, the Company
accrued this $925,000 settlement, as well as an asset of $425,000, representing
expected proceeds from insurance coverage. The Company's insurance carriers have
initially denied coverage on this settlement. The Company currently is in the
process of disputing this decision. If the proposed settlement is not given
final approval by the Court, and any subsequent negotiations with plaintiffs'
counsel are not successful, the Company would expect to mount a vigorous defense
to the class actions. The Company anticipates that the Merger will close prior
to a hearing in the Delaware Court of Chancery on final approval of the proposed
settlement and thus does not anticipate that the outcome of the settlement
hearing would affect the consummation of the Merger or otherwise cause a delay
in the Company stockholders' receipt of the Merger consideration. However, if,
at any time, plaintiffs did seek any injunctive relief with respect to the
Merger, the Company believes that any such application would be without merit
and would oppose it vigorously. If the settlement is not approved, plaintiffs'
could seek to unwind the Merger. Given the consequences of such an action to
stockholders, however, courts have been reluctant to grant this type of relief.


                                       11
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                          NOTES TO FINANCIAL STATEMENTS

RESTRUCTURING AND OTHER CHARGES

      For the nine months ended September 30, 2001, the Company utilized
approximately $0.3 million of reserves previously established in connection with
its fiscal 1999 restructuring plan. The Company anticipates utilizing the
remaining balance of its reserves during fiscal 2001.

      The balance of the fiscal 1999 restructuring and other charges are as
follows:

<Table>
<Caption>

                                              BALANCE AT          UTILIZED         BALANCE AT
                                              DECEMBER 31,   ------------------   SEPTEMBER 30,
                                                  2000        CASH     NONCASH        2001
                                                 ------     -------   --------       ------
<S>                                               <C>         <C>                     <C>
Employee termination and severance costs .        $188        $159          --        $ 29
Writedown on long-lived assets ...........          --          --          --        $ --
Exit costs ...............................          70          --          --        $ 70
Other ....................................           8          --          --        $  8
                                                  ----        ----        ----        ----
                                                  $266        $159          --        $107
                                                  ----        ----        ----        ----

Other Charges
Writedown on long-lived ..................        $ --        $ --          --        $ --
Inventory markdowns ......................          --          --          --          --
Other ....................................         626         131          --         495
                                                  ----        ----        ----        ----
                                                  $626        $131          --        $495
                                                  ----        ----        ----        ----
                                                  $892        $290          --        $602
                                                  ====        ====        ====        ====
</Table>

PROVISION FOR INCOME TAXES

      The provision for income taxes represents Federal, foreign, state and
local income taxes. The effective income tax rate was 205.0% and 41.0% for the
nine months ended September 30, 2001 and October 1, 2000, respectively. This
rate reflects the effect of state and local taxes, tax rates in certain foreign
jurisdictions, and certain nondeductible expenses.

      Realization of the future tax benefits related to the deferred tax
assets is dependent on many factors including the Company's ability to
generate sufficient taxable income within the net operating loss carry
forward period and potential limitations imposed by the Internal Revenue
Code. A full valuation allowance of $48.4 million was recorded at September
30, 2001 based on current operating results and therefore management's
assessment that it is more likely than not that all the net deferred tax
assets will be not realized through future taxable earnings or implementation
of tax planning strategies, if the Company were to continue as a stand-alone
entity. However, the Company believes that the Merger will occur during
fiscal 2001.

STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information:

<Table>
<Caption>

                                                             NINE MONTHS ENDED
                                                     ------------------------------
                                                     SEPTEMBER 30,       OCTOBER 1,
                                                        2001               2000
                                                     ------------        ----------
     CASH PAID FOR:                                          (IN THOUSANDS)
<S>                                                    <C>                <C>
            Interest .....................             $2,873             $1,534
                                                       ======             ======
            Taxes ........................             $3,075             $5,458
                                                       ======             ======
</Table>

MANAGEMENT ESTIMATES

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses reported in those financial statements. Actual results could differ
from those based upon such estimates and assumptions.


                                       12
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 2 -- COMPREHENSIVE (LOSS) INCOME

      Comprehensive (loss) income and its components, are as follows:

<Table>
<Caption>

                                                           THREE MONTHS ENDED          NINE MONTHS ENDED
                                                         ----------------------      ----------------------
                                                       September 30,   October 1,  September 30,   October 1,
                                                           2001          2000          2001          2000
                                                         --------      --------      --------      --------
<S>                                                      <C>           <C>           <C>           <C>
NET (LOSS) INCOME ..................................     $(53,717)     $ 13,980      $(63,130)     $ 10,327
                                                         --------      --------      --------      --------

Other comprehensive (loss) income, before tax:
Foreign currency translation .......................            3           (12)           (7)         (139)
Unrealized loss on forward exchange contracts, net .       (7,461)           --        (4,286)           --
                                                         --------      --------      --------      --------
Other comprehensive loss, before tax ...............       (7,458)          (12)       (4,293)         (139)
Income tax benefit on other comprehensive income ...       (2,910)           --        (1,672)           --
                                                         --------      --------      --------      --------
Other comprehensive loss, net of tax ...............       (4,548)          (12)       (2,621)         (139)


COMPREHENSIVE (LOSS) INCOME ........................     $(58,265)     $ 13,968      $(65,751)     $ 10,188
                                                         ========      ========      ========      ========
</Table>

      On January 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Accordingly, a net unrealized loss on
foreign currency forward contracts for the three and nine months ended September
30, 2001 of $4.6 million and $2.6 million, respectively, is included in other
comprehensive income. The unrealized loss on forward exchange contracts included
in other comprehensive income for the three and nine months ended September 30,
2001 is net of reclassification adjustments for realized gains on forward
exchange contracts.

      Accumulated other comprehensive income (loss) is as follows:

<Table>
<Caption>

                                               THREE MONTHS ENDED SEPTEMBER 30, 2001
                                               -------------------------------------
                                                                                TOTAL
                                                            UNREALIZED       ACCUMULATED
                                             FOREIGN       GAIN (LOSS) ON       OTHER
                                             CURRENCY         FORWARD       COMPREHENSIVE
                                            TRANSLATION      CONTRACTS       INCOME (LOSS)
                                            -----------    --------------   --------------
                                                          (IN THOUSANDS)
<S>                                           <C>             <C>             <C>
                 Beginning balance ...        $(1,425)        $ 3,175         $ 1,750
                 Current-period change              3          (7,461)         (7,458)
                                              -------         -------         -------
                 Ending balance ......        $(1,422)        $(4,286)        $(5,708)
                                              =======         =======         =======

<Caption>

                                               NINE MONTHS ENDED SEPTEMBER 30, 2001
                                               ------------------------------------
                                                                                TOTAL
                                                            UNREALIZED       ACCUMULATED
                                             FOREIGN       GAIN (LOSS) ON       OTHER
                                             CURRENCY         FORWARD       COMPREHENSIVE
                                            TRANSLATION      CONTRACTS       INCOME (LOSS)
                                            -----------    --------------   --------------
                                                          (IN THOUSANDS)
<S>                                           <C>             <C>             <C>
                 Beginning balance ...        $(1,415)        $    --         $(1,415)
                 Current-period change             (7)         (4,286)         (4,293)
                                              -------         -------         -------
                 Ending balance ......        $(1,422)        $(4,286)        $(5,708)
                                              =======         =======         =======
</Table>


                                       13
<Page>

                         DONNA KARAN INTERNATIONAL INC.

                          NOTES TO FINANCIAL STATEMENTS

NOTE 3 -- SEGMENT INFORMATION

      Information related to the Company's reportable business segments are as
follows:

<Table>
<Caption>
                                     WHOLESALE          LICENSING        RETAIL           TOTAL
                                   ---------------     -----------    -----------    ---------------
                                                            (IN THOUSANDS)
<S>                                  <C>               <C>           <C>            <C>
THREE MONTHS ENDED
SEPTEMBER 30, 2001
------------------
Net revenues from external
  Customers ....................     $ 129,856         $  15,497     $  31,873      $ 177,226
Intersegment revenues ..........        24,509                --            --         24,509
Segment operating profit (loss)         (8,269)(a)         8,510        (4,240)        (3,999)(a)

THREE MONTHS ENDED
OCTOBER 1, 2000
------------------
Net revenues from external
  Customers ....................     $ 158,395         $  12,765     $  32,581      $ 203,741
Intersegment revenues ..........        23,600                --            --         23,600
Segment operating profit (loss)         19,596             6,142        (1,012)        24,726

NINE MONTHS ENDED
SEPTEMBER 30, 2001
------------------
Net revenues from external
  Customers ....................     $ 346,384         $  42,058     $  85,771      $ 474,213
Intersegment revenues ..........        55,835                --            --         55,835
Segment operating profit (loss)        (23,718)(a)        23,025       (16,892)       (17,585)(a)
Segment assets .................       221,020             9,878        66,971        297,869

NINE MONTHS ENDED
OCTOBER 1, 2000
------------------
Net revenues from external
Customers ......................     $ 374,514         $  32,433     $  90,077      $ 497,024
Intersegment revenues ..........        52,474                --            --         52,474
Segment operating profit (loss)         12,482            14,438        (7,632)        19,288
Segment assets .................       247,813             7,301        58,647        313,761
</Table>


(a) Includes $8.2 million and $10.5 million in transaction costs related to the
proposed LVMH Merger for the three and nine months ended September 30, 2001,
respectively.

      Information related to the Company's geographic segments are as follows:

<Table>
<Caption>

                           THREE MONTHS ENDED              NINE MONTHS ENDED
                      -----------------------------   -----------------------------
                      SEPTEMBER 30,     OCTOBER 1,    SEPTEMBER 30,     OCTOBER 1,
                          2001            2000            2001            2000
                      -------------     ----------    ------------      ----------
                                            (IN THOUSANDS)
<S>                     <C>             <C>             <C>             <C>
Net revenues:
   United States        $101,744        $125,383        $285,303        $319,764
   Japan .......           6,176           6,996          17,862          16,001
   Other .......          69,306          71,362         171,048         161,259
                        --------        --------        --------        --------
                        $177,226        $203,741        $474,213        $497,024
                        ========        ========        ========        ========
</Table>


                                       14
<Page>

                         DONNA KARAN INTERNATIONAL INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

      Donna Karan International Inc. (together with its subsidiaries, the
"Company") is one of the world's leading international fashion design houses.
The Company designs, contracts for the manufacture of, markets, retails and
distributes collections of men's and women's clothing, sportswear, accessories,
and shoes under the DONNA KARAN NEW YORK, DKNY, DKNY JEANS and DKNY ACTIVE brand
names. The Company also selectively has granted licenses for the manufacture and
distribution of certain other products under its brand names, including beauty
and beauty-related products, jeanswear, activewear, hosiery, intimate apparel,
eyewear, and children's apparel.

RESULTS OF OPERATIONS

      The Company's business is comprised of wholesale, licensing, and retail
activities. The Company utilizes a 52- or 53-week fiscal year ending on the
Sunday nearest December 31. The following discussion provides information and
analysis of the Company's results of operations for the three and nine months
ended September 30, 2001 and October 1, 2000.

      The following tables set forth certain segment data:

<Table>
<Caption>
                                             THREE MONTHS ENDED            NINE MONTHS ENDED
                                        ---------------------------    -------------------------
                                        SEPTEMBER 30,    OCTOBER 1,    SEPTEMBER 30,  OCTOBER 1,
                                            2001           2000           2001           2000
                                          --------       --------       --------       --------
                                                             (IN MILLIONS)
<S>                                       <C>            <C>            <C>            <C>
Net revenues from external customers:
     By segments:
               Wholesale ............     $  129.9       $  158.4       $  346.4       $  374.5
               Licensing ............         15.4           12.7           42.0           32.4
               Retail ...............         31.9           32.6           85.8           90.1
                                          --------       --------       --------       --------
                                          $  177.2       $  203.7       $  474.2       $  497.0
                                          ========       ========       ========       ========

     By geographic area:
               United States ........     $  101.7       $  125.4       $  285.3       $  319.8
               Japan ................          6.2            7.0           17.9           16.0
               Other ................         69.3           71.3          171.0          161.2
                                          --------       --------       --------       --------
                                          $  177.2       $  203.7       $  474.2       $  497.0
                                          ========       ========       ========       ========

Segment operating (loss) profit:
               Wholesale ............     $   (8.3)      $   19.6       $  (23.7)      $   12.5
               Licensing ............          8.5            6.1           23.0           14.4
               Retail ...............         (4.2)          (1.0)         (16.9)          (7.6)
                                          --------       --------       --------       --------
                                          $   (4.0)(a)   $   24.7       $  (17.6)(a)   $   19.3
                                          ========       ========       ========       ========
</Table>

(a) Includes $8.2 million and $10.5 million in transaction costs related to the
    proposed LVMH Merger for the three and nine months ended September 30, 2001,
    respectively.


                                       15
<Page>

                         DONNA KARAN INTERNATIONAL INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


      The following tables set forth certain condensed statement of income data:

<Table>
<Caption>

                                                  THREE MONTHS ENDED                               NINE MONTHS ENDED
                                        ------------------------------------------    -------------------------------------------
                                          SEPTEMBER 30,              OCTOBER 1,           SEPTEMBER 30,           OCTOBER 1,
                                               2001                     2000                  2001                   2000
                                        -------------------     ------------------    ------------------      -------------------
                                                                         (DOLLARS IN MILLIONS)
<S>                                     <C>           <C>       <C>          <C>      <C>           <C>       <C>          <C>
Net revenues ......................     $  177.2      100.0%    $  203.7     100.0%   $  474.2      100.0%    $  497.0     100.0%
                                        ========                ========              ========                ========
Gross profit ......................         53.9       30.4         72.7      35.7       135.5       28.6        161.0      32.4
Selling, general and administrative
    Expenses ......................         57.9       32.7         48.0      23.5       153.1       32.3        141.9      28.5
Operating (loss) income ...........         (4.0)      (2.3)        24.7      12.1       (17.6)      (3.7)        19.3       3.9
Net (loss) income .................        (53.7)     (30.3)        14.0       6.9       (63.1)     (13.3)        10.3       2.1
</Table>

THIRD QUARTER FISCAL 2001 COMPARED WITH THIRD QUARTER FISCAL 2000

   NET REVENUES       Net revenues for the three months ended September 30,
2001 decreased $26.5 million, or 13.0%, to $177.2 million as compared to net
revenues of $203.7 million in the corresponding prior-year period. On an
overall basis, the Company's revenues have been negatively impacted by the
generally worsening economic conditions, which deteriorated further after the
tragic events of September 11, 2001.

      Wholesale revenues for the three months ended September 30, 2001 decreased
$28.5 million, or 18.0%, to $129.9 million as compared to $158.4 million in the
corresponding prior-year period. The decrease was attributable to decreases in
sales from the womens and menswear businesses, partially offset by an increase
in the accessories business.

      Licensing revenues for the three months ended September 30, 2001 increased
$2.7 million, or 21.4%, to $15.4 million as compared to $12.7 million in the
corresponding prior-year period. The increase was primarily due to royalties
from the Company's new regional license in Asia and growth in sales of certain
other new and existing licensed products.

      Retail revenues for the three months ended September 30, 2001 decreased
$0.7 million, or 2.2%, to $31.9 million as compared to $32.6 million in the
corresponding prior-year period. The decrease was primarily attributable to a
14.0% overall decrease in outlet store sales, partially offset by a 19.1%
overall increase in full-price retail store sales. Overall, comparable store
sales decreased 6.9% from the corresponding prior-year period.

   GEOGRAPHIC
      Net revenues for the United States for the three months ended September
30, 2001 decreased $23.7 million, or 18.9%, to $101.7 million as compared to
$125.4 million in the corresponding prior-year period. The decrease was
primarily attributable to decreased wholesale revenues and, to a lesser extent,
decreased retail revenues, partially offset by an increase in licensing
revenues.

      Net revenues for Japan for the three months ended September 30, 2001
decreased $0.8 million, or 11.7%, to $6.2 million as compared to $7.0 million in
the corresponding prior-year period. The decrease was primarily attributable to
decreased wholesale revenues to Japan, partially offset by increased royalties
from the Company's Japanese licensee.

      Net revenues for other geographic areas for the three months ended
September 30, 2001 decreased $2.0 million, or 2.9%, to $69.3 million as compared
to $71.3 million in the corresponding prior-year period. The decrease was
primarily attributable to decreased wholesale revenues, partially offset by
increased retail and licensing revenues.


                                       16
<Page>

                         DONNA KARAN INTERNATIONAL INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


   GROSS PROFIT
   Gross profit as a percentage of net revenues for the three months ended
September 30, 2001 was 30.4%, as compared to 35.7% in the corresponding
prior-year period. The decrease in gross profit primarily reflected lower
margins in the wholesale and retail segments, partially offset by an increase in
the higher margin licensing business. The decrease in both the wholesale and
retail segments continued to be impacted by lower margins on the liquidation of
prior and current seasons' inventory.

   SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
   Selling, general and administrative expenses were $57.9 million, or
32.7% of net revenues for the three months ended September 30, 2001, as compared
to $47.9 million, or 23.5% in the corresponding prior-year period. Included in
these costs during the three months ended September 30, 2001, was $8.2 million
in transaction costs related to the proposed LVMH Merger. Exclusive of these
costs, selling, general and administrative expenses were $49.7 million or 28.1%
of net revenues for the three months ended September 30, 2001. The increase was
primarily a result of increased costs associated with the growth in the number
of full-price free-standing retail stores, partially offset by lower selling and
administrative expenses in the wholesale segment, as compared to the prior year.

   OPERATING (LOSS) INCOME
   Operating loss for the three months ended September 30, 2001 was $4.0 million
as compared to operating income of $24.7 million in the corresponding prior-year
period, a decrease of $28.7 million, or 116.2%. Included in the operating loss
during the three months ended September 30, 2001, is $8.2 million in transaction
costs related to the proposed LVMH Merger. Exclusive of these costs, operating
income decreased $20.5 million, or 83.1%, to $4.2 million for the three months
ended September 30, 2001. The decrease was attributable to decreased operating
income in the wholesale segment and increased operating losses in the retail
segment, both partially offset by increased operating profit in the licensing
segment.

   INTEREST EXPENSE, NET
   Interest expense, net was $1.3 million for the three months ended September
30, 2001 as compared to $1.0 million for the corresponding prior-year period.
The increase was primarily attributable to an increase in average borrowings
offset by lower interest rates during the three months ended September 30, 2001,
as compared to the corresponding prior-year period.

   PROVISION FOR INCOME TAXES
   The provision for income taxes represents Federal, foreign, state and local
income taxes. The effective income tax rate was 921.0% and 41.0% for the three
months ended September 30, 2001 and October 1, 2000, respectively. This rate
reflects the effect of state and local taxes, tax rates in certain foreign
jurisdictions, and certain nondeductible expenses.

   Realization of the future tax benefits related to the deferred tax assets
is dependent on many factors including the Company's ability to generate
sufficient taxable income within the net operating loss carry forward period
and potential limitations imposed by the Internal Revenue Code. A full
valuation allowance of $48.4 million was recorded at September 30, 2001 based
on current operating results and therefore management's assessment that it is
more likely than not that all the net deferred tax assets will be not
realized through future taxable earnings or implementation of tax planning
strategies, if the Company were to continue as a stand-alone entity. However,
the Company believes that the Merger will occur during fiscal 2001.

   NET (LOSS) INCOME
   Net loss for the three months ended September 30, 2001 was $53.7 million, as
compared to net income of $14.0 million in the corresponding prior-year period,
a decrease of $67.7 million, or 484.2%. Included in net loss during the three
months ended September 30, 2001, was $5.0 million, net of income taxes, in
transaction costs related to the proposed LVMH Merger. Exclusive of these costs,
net income decreased $62.7 million, or 448.6%, to $48.7 million for the three
months ended September 30, 2001. The decrease was primarily attributable to
significantly lower net revenues in the Company's wholesale segment, decreased
gross margins in the wholesale and retail segments and higher interest expense,
partially offset by an increase in the higher margin licensing business. In
addition, no income tax benefit was recognized, and an valuation allowance of
$48.4 million on deferred tax assets was recorded during the three months ended
September 30, 2001.


                                       17
<Page>

                         DONNA KARAN INTERNATIONAL INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


NINE MONTHS FISCAL 2001 COMPARED TO NINE MONTHS FISCAL 2000

   NET REVENUES
   Net revenues for the nine months ended September 30, 2001 decreased $22.8
million, or 4.6%, to $474.2 million as compared to net revenues of $497.0
million in the corresponding prior-year period.

   Wholesale revenues for the nine months ended September 30, 2001 decreased
$28.1 million, or 7.5%, to $346.4 million as compared to $374.5 million in the
corresponding prior-year period. The decrease was attributable to decreases in
sales from the womens, menswear and accessories businesses, partially offset by
an increase in sales from the international DKNY JEANS business.

   Licensing revenues for the nine months ended September 30, 2001 increased
$9.6 million, or 29.7%, to $42.0 million as compared to $32.4 million in the
corresponding prior-year period. The increase was primarily due to royalties
from the Company's new regional license in Asia and growth in sales of certain
other new and existing licensed products.

   Retail revenues for the nine months ended September 30, 2001 decreased $4.3
million, or 4.8%, to $85.8 million as compared to $90.1 million in the
corresponding prior-year period. The decrease was primarily attributable to a
14.5% decrease in outlet store sales, partially offset by a 12.3% increase in
full-priced retail store sales. Overall, comparable store sales decreased 9.4%
from the corresponding prior-year period.

   GEOGRAPHIC
   Net revenues for the United States for the nine months ended September 30,
2001 decreased $34.5 million, or 10.8%, to $285.3 million as compared to $319.8
million in the corresponding prior-year period. The decrease was primarily
attributable to decreased wholesale revenues and, to a lessor extent, decreased
retail revenues, partially offset by an increase in licensing revenues.

   Net revenues for Japan for the nine months ended September 30, 2001 increased
$1.9 million, or 11.6%, to $17.9 million as compared to $16.0 million in the
corresponding prior-year period. The increase was attributable to both increased
wholesale revenues to Japan and increased royalties from the Company's Japanese
licensee.

   Net revenues for other geographic areas for the nine months ended September
30, 2001 increased $9.8 million, or 6.1%, to $171.0 million as compared to
$161.2 million in the corresponding prior-year period. The increase was
primarily attributable to increased wholesale and licensing revenues, and to a
lesser extent, increased retail revenues.

   GROSS PROFIT
   Gross profit as a percentage of net revenues for the nine months ended
September 30, 2001 was 28.6%, as compared to 32.4% for the corresponding
prior-year period. In June 2000, the Company reversed $0.8 million of
restructuring reserves classified in cost of sales, determined no longer to be
necessary. Exclusive of the restructuring credit, gross profit as a percentage
of net revenues for the nine months ended October 1, 2000 was 32.2%. The
decrease in gross profit primarily reflected lower margins in the wholesale and
retail segments, partially offset by an increase in the higher margin licensing
business. The decrease in the wholesale segment was impacted by higher dilution,
and both the wholesale and retail segments were impacted by lower margins on the
liquidation of prior seasons inventory.

   SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
   Selling, general and administrative expenses were $153.1 million, or 32.3% of
net revenues for the nine months ended September 30, 2001, as compared to $141.9
million or 28.5% in the corresponding prior-year period. Included in these
costs, during the nine months ended September 30, 2001, is $10.5 million in
transaction costs related to the proposed LVMH Merger. Exclusive of these costs,
selling, general and administrative expenses were $142.6 million or 30.1% of net
revenues for the nine months ended September 30, 2001. The increase was
primarily a result of increased costs associated with the growth in the number
of full-price free-standing retail stores, partially offset by lower selling and
administrative expenses in the wholesale segment, as compared to the prior year.


                                       18
<Page>

                         DONNA KARAN INTERNATIONAL INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

   OPERATING (LOSS) INCOME
   Operating loss for the nine months ended September 30, 2001 was $17.6 million
as compared to operating income of $19.3 million in the corresponding prior-year
period, a decrease of $36.9 million, or 191.2%. Included in the operating loss
during the nine months ended September 30, 2001, was $10.5 million in
transaction costs related to the proposed LVMH Merger. Exclusive of these costs,
operating income decreased $26.4 million, or 136.8%, to an operating loss of
$7.1 million for the nine months ended September 30, 2001. The decrease was
attributable to increased operating losses in the wholesale and retail segments,
partially offset by increased operating profit in the licensing segment.

   INTEREST EXPENSE, NET
   Interest expense, net was $3.1 million for the nine months ended September
30, 2001 as compared to $1.8 million for the corresponding prior-year period.
The increase was primarily attributable to an increase in average borrowings
offset by lower interest rates during the nine months ended September 30, 2001,
as compared to the corresponding prior-year period.

   PROVISION FOR INCOME TAXES
   The provision for income taxes represents Federal, foreign, state and local
income taxes. The effective income tax rate was 205.0% and 41.0% for the nine
months ended September 30, 2001 and October 1, 2000, respectively. This rate
reflects the effect of state and local taxes, tax rates in certain foreign
jurisdictions, and certain nondeductible expenses.

   Realization of the future tax benefits related to the deferred tax assets
is dependent on many factors including the Company's ability to generate
sufficient taxable income within the net operating loss carry forward period and
potential limitations imposed by the Internal Revenue Code. A full valuation
allowance of $48.4 million was recorded at September 30, 2001 based on
current operating results and therefore management's assessment that it is
more likely than not that all the net deferred tax assets will be not
realized through future taxable earnings or implementation of tax planning
strategies, if the Company were to continue as a stand-alone entity. However,
the Company believes that the Merger will occur during fiscal 2001.

   NET (LOSS) INCOME
   Net loss for the nine months ended September 30, 2001 was $63.1 million, as
compared to net income of $10.3 million in the corresponding prior-year period,
a decrease of $73.4 million, or 711.3%. Included in net loss, during the nine
months ended September 30, 2001, was $6.4 million, net of income taxes, in
transaction costs related to the proposed LVMH Merger. Exclusive of these costs,
net income decreased $67.0 million, or 649.4%, to a net loss of $56.7 million
for the nine months ended September 30, 2001. The decrease was primarily
attributable to lower net revenues and decreased gross margins in both the
wholesale and retail segments and higher interest expense, partially offset by
an increase in the higher margin licensing business. In addition, no income tax
benefit was recognized, and an valuation allowance of $48.4 million on deferred
tax assets was recorded during the nine months ended September 30, 2001.

LIQUIDITY AND CAPITAL RESOURCES

   The Company's principal sources of funds have historically been cash flow
from operations and borrowings under its revolving credit facility. As more
fully described below, in order to supplement the Company's historical source of
funds, Gabrielle Studio, Inc. (an LVMH affiliate) has agreed to defer until June
30, 2002 the payment of royalties owed by the Company for the second, third and
fourth quarters of 2001. The Company's principal need for funds is to finance
working capital (principally inventory and receivables), capital expenditures
(including the construction of new shop-in-shops, outlet and full-price
free-standing retail stores), and investments in the start-up of new collections
and the extension of existing collections. At September 30, 2001, the Company
had cash and cash equivalents of $4.2 million, as compared to $6.8 million at
October 1, 2000.

   The Company has a $150.0 million revolving credit facility (the "Facility").
The Facility is used for working capital requirements and general corporate
purposes. At September 30, 2001, $57.6 million was outstanding under the
Facility, as compared to $9.5 million outstanding at October 1, 2000.

   The Company's results of operations in the second and third quarters of
fiscal 2001, having been affected by business and economic conditions, are below
forecast and are expected to continue below forecast for the balance of the
fiscal year. In August, 2001 the Company entered into an agreement with
Gabrielle Studio, Inc. (an LVMH affiliate) pursuant to which Gabrielle Studio,
Inc. agreed to defer until June 30, 2002 the payment of royalties owed by the
Company for the second, third and fourth quarters of 2001. In August 2001, the
Company amended its credit facility. The August 2001 credit facility amendment
provides (i) that an event of default will occur on January 7, 2002 if the
merger with LVMH has not


                                       19
<Page>

                         DONNA KARAN INTERNATIONAL INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

occurred, (ii) for changes in the application of credit facility covenant
calculations so as to exclude from such calculations, the royalty payments
deferred by the above referenced agreement with Gabrielle Studio, Inc., together
with certain unpaid severance and merger expenses, and (iii) that the Company
must maintain a minimum of $20 million in availability under the credit facility
from December 15, 2001 through the expiration of the credit facility. In October
2001, the Company further amended its credit facility. The October amendment,
while waiving need for the Company to meet certain financial covenants as of the
end of the third quarter, also reduced the amount the Company can borrow under
the facility to $102 million for the month of November 2001, $90 million for the
period from December 1, 2001 through December 14, 2001 and $85 million
thereafter. It also requires that the Company maintain a minimum credit
availability of $4 million for the period from October 22, 2001 through October
31, 2001, $8 million for the period from November 1, 2001 though November 14,
2001, and $11 million for the period from November 15, 2001 through December 14,
2001, in addition to the $20 million requirement for the period subsequent to
December 14, 2001 that was contained in the August amendment. In addition to the
October 2001 and August 2001 credit facility amendments, in June 2001 the
Company also entered into an amendment of its credit facility which enabled the
Company to borrow amounts in excess of its calculated borrowing base during the
months of June, July and August 2001. The Company believes that its results of
operations for the balance of the fiscal year will cause it to violate several
year-end financial covenants of its most recently amended credit facility. The
failure of the Merger with LVMH to close by January 7, 2002 will cause an event
of default under the credit agreement. The Company believes that the Merger will
occur prior to January 7, 2002, and if not, that it will be required to amend
its existing credit facility (which expires on May 1, 2003), or obtain an
alternate source of long-term financing. However, there can be no assurances
that an amended credit facility or any new financing will be available and, if
available, that the terms will be as favorable as the existing terms in the
current credit facility.

   Net cash used for operating activities was $62.8 million for the nine months
ended September 30, 2001 as compared to $13.9 million in the corresponding
prior-year period. The increase in net cash used by operating activities
primarily reflects, an increase in the loss incurred by the Company, an increase
in accounts receivable and inventory, and a greater decrease in accounts
payable, accrued expenses and other current liabilities. Net cash used for
investing activities increased $2.4 million for the nine months ended September
30, 2001 as compared to the corresponding prior-year period, primarily due to
the Company's increased purchases of property and equipment in the current
period. Financing activities primarily reflect borrowings under the Company's
Facility. Net cash provided by financing activities for the nine months ended
September 30, 2001 was $57.7 million, as compared to $9.5 million provided in
the corresponding prior-year period. The increase in net cash provided by
financing activities was due to greater amounts outstanding under the Company's
Facility during the current period in order to finance higher levels of
inventory, a decrease in accounts payable, accrued expenses and other current
liabilities, as well as an increase in the loss incurred by the Company.

   As a matter of policy, the Company enters into forward exchange contracts
with parties who are major international banks and financial institutions that
have at least an "A" (or equivalent) credit rating. The Company's exposure to
credit loss in the event of nonperformance by any of the counterparties is
limited to only the recognized, but not realized, gains attributable to the
contracts. Management believes risk of loss is remote and in any event would be
immaterial. Costs associated with entering into such contracts have not been
material to the Company's financial results. The Company's measured
value-at-risk from holding such derivative instruments, using a variance
co-variance model with a 95 percent confidence level, assuming normal market
conditions at September 30, 2001 was approximately $4.4 million.

   Capital expenditures, primarily for leasehold improvements and leasehold
improvements related to outlet and full-price free-standing retail stores,
equipment, machinery, computers and office furniture, were approximately $6.2
million and $3.8 million for the nine months ended September 30, 2001 and
October 1, 2000, respectively. As of November 1, 2001, the Company had
outstanding commitments for additional capital expenditures during fiscal 2001
of approximately $0.5 million.

   The Company anticipates that it will be able to satisfy its ongoing operating
cash requirements through the merger with LVMH with cash flow from operations,
supplemented by borrowings under its Facility, the deferral by Gabrielle Studio
Inc. of royalties due by the Company for the second, third and fourth quarters
of 2001 and, from time to time, amounts received in connection with strategic
transactions, including licensing arrangements. Events that may impact this
include, but are not limited to, future events that may have the effect of
reducing available cash balances (such as unexpected operating losses or
increased capital or other expenditures), as well as future circumstances that
might reduce or eliminate the availability of external financing.


                                       20
<Page>

                         DONNA KARAN INTERNATIONAL INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

      Certain statements contained herein are forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 that have been made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The words
and phrases "will likely result," "are expected to," "will continue," "is
anticipated," "estimates," "projects," "believes," "plans" or similar
expressions, are intended to identify "forward-looking statements" include,
without limitation, the Company's expectations regarding sales, earnings, or
other future financial performance and liquidity, and general statements about
future operations and operating results. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include, without limitation:
(i) the failure of certain key members of the Company's design teams or
management, including Ms. Karan, to continue to be active in the business of the
Company; (ii) the failure to consummate the proposed Merger with LVMH at all due
to the failure of a condition in the merger agreement or to consummate the
Merger on a timely basis due to delays in the process of satisfying the
conditions contained therein, the possibility of a termination of the Company's
license with Gabrielle Studio, Inc., a bankruptcy of Gabrielle Studio, Inc., or
transfer of the stock of Gabrielle Studio, Inc. or a change in the relationship
under the agreement with Gabrielle Studio, Inc. following LVMH's purchase of
Gabrielle Studio Inc.; (iii) political and economic instability resulting from
acts of terrorism or war that may disproportionately adversely affect luxury
goods manufacturers and retailers; (iv) the timing and expense associated with,
and effects of, the strategic initiatives being implemented by the Company; (v)
risks associated with the receipt, pricing, and timing of customer orders; (vi)
general competitive factors and the overall financial condition of the apparel
industry, the retail industry, and the general economy; (vii) timing of and
costs associated with new stores openings and the Company's economic ability to
continue to open new stores; (viii) risks associated with the Company's
increasing royalty revenues as a percent of the Company's total revenues and net
income and risks associated with a lack of operational or financial control over
the Company's licensees; (ix) risks to the Company's existing wholesale
businesses from the Company's licensing of related products; (x) a change in
retailer or consumer acceptance of the Company's products; (xi) the variability
of the Company's results in any period due to the seasonal nature of the
business, the timing and level of the Company's sales, the timing of launch of
new products and collections and opening of new doors, fashion trends, and the
timing, terms, consummation, or success of any joint ventures, licenses, or
other dispositions of product lines; (xii) consolidation and restructuring in
the retail industry causing a decrease in the number of stores that sell the
Company's products, or an increase in the ownership concentration within the
retail industry; (xiii) social, political and economic risks to the Company's
foreign operations and customers, including changes in foreign investment and
trade policies and regulations of the host countries and of the United States;
(xiv) changes in laws, regulations, and policies, including changes in
accounting standards, that affect, or will affect, the Company in the United
States and abroad; (xv) foreign currency fluctuations affecting the Company's
results of operations and value of its foreign assets, the relative price at
which the Company and foreign competitors sell their products in the same
markets, and the Company's operating and manufacturing costs outside of the
United States; (xvi) shipment delays, depletion of inventory, and increased
production costs resulting from disruption at any of the Company's facilities or
other causes; (xvii) changes in product mix to ones which are less profitable;
(xviii) infringements of the Company's trademarks and other proprietary rights,
imitations or diversions of the Company's products, or inability to obtain
trademark protection outside the United States for one or more of the Company's
marks; (xix) political or economic instability resulting in the disruption of
trade from the countries in which the Company's contractors, suppliers,
licensees, or customers are located, the imposition of additional regulations
relating to imports, the imposition of additional duties, taxes, and other
charges on imports, significant fluctuations of the value of the dollar against
foreign currencies, or restriction on transfer of funds; (xx) the inability of a
contractor to deliver the Company's products in a timely manner thereby causing
the Company to miss the delivery date requirements of its customers, which in
turn could result in the cancellation of orders, refusal to accept deliveries,
or a reduction in the selling price; or (xxi) the violation of labor or other
laws by the Company, any independent manufacturer, or any licensee. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements made herein or elsewhere whether as a result of new information,
future events or otherwise.



                                       21
<Page>

                         DONNA KARAN INTERNATIONAL INC.
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

      There have been no material changes in information reported since the
fiscal year ended December 31, 2000.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

    None

(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated July 16, 2001, relating to
the appointment of Giuseppe Brusone as Chief Executive Officer, succeeding John
D. Idol. Included in such report were a letter agreement between Mr. Idol and
the Company, amending Mr. Idol's employment arrangements, a letter agreement
between Mr. Idol and LVMH whereby LVMH agrees to purchase Mr. Idol's stock on
November 15, 2001 if the merger has not theretofore been consummated, a letter
agreement between LVMH, Gabrielle Studio, Inc., the Company and certain other
parties related to deferred royalty payments, an amendment to the Agreement and
Plan of Merger, dated as of July 13, 2001, and the press release, dated as of
July 16, 2001, announcing the appointment of Mr. Brusone.


                                       22
<Page>


                                   SIGNATURES

   Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                            DONNA KARAN INTERNATIONAL INC.
                                                      (Registrant)


Date: November 14, 2001                        By:   /s/ James G. Thompson
                                                  -------------------------
                                                  James G. Thompson
                                                  Senior Vice President -
                                                  Finance






                                       23