Donna Karan is more prepared to deal with this economic downturn than most.

“I started my company in one of them,” she tells me in her Urban Zen store in New York, which makes a calm, quiet contrast to the busy preparations for the DKNY show happening in her work studio next door.

Incense smoke snakes its way through the air, adding to her image as the fashion world’s spiritual queen yogi. But underneath her relaxed, oversized sweater and leotard (she wears one everyday), lies a mogul with a shrewd business sense.

She began honing it early on. Her father was a custom tailor, and her mother a showroom model. “I was brought up on 7th Avenue. It’s in my blood. It’s in my character and nature,” she adds.

Q. You’ve weathered several economic downturns. Have you noticed a difference in how this one is affecting your approach to Donna Karan Collection and DKNY?

A. I wasn’t even aware of it in the process, but you’ll see that the fall Donna Karan is very reflective of the collection that I did in 1985. And that will be very obvious to everyone. Meanwhile, DKNY, which just celebrated its 20th anniversary, will be more about sophistication and moving forward. We’re catering to another generation.

Q. For women who are scaling back on their shopping and trying to decide what to invest in, what advice would you give?

A. There has to be an emotional purpose. And you have to think about what is lacking in your wardrobe. Look for things that flatter the body and make you feel good. The minute I put on one of these pieces (motioning to her sweater), it makes me feel good. It’s not about the garment, it’s about you. But I think that more people should remember the importance of buying in this climate. It’s important because you’re buying to help another human being, to save a job.

Q. Karl Lagerfeld and (Council of Fashion Designers of America president) Steven Kolb said in separate interviews that the good thing about the recession is that it’s making the fashion industry scale back and focus on fashion again. Would you agree with this?

A. Oh God yes. I think it’s a paring down and I think there’s an awakening. Things have been so fashion driven. Fashion seems to come and then it feels like last year’s fashion. It’s good to get back to an idea of seasonless dressing and allowing the consumer to have clothes with longevity to them, while at the same time giving them a reason to buy. And teaching the customer that if sales continue the way they are, there will be no industry. This is not something as frivolous as the world of fashion. It’s affecting everyone the world over.

Full circle
• “DKNY started as a sportswear brand. There are essential iconic style elements with DKNY and we’re returning to those,” Donna Karan explains. She breaks them down.
• A great pair of jeans
• The anorak
• A T-shirt
• A trench coat
• The boyfriend jacket
• The jumpsuit

– Read an exclusive interview with designer Yohji Yamamoto.