California Apparel News

Taking its cue from luxury lifestyle competitors such as Escada, Chanel and Armani, St. John Knits International Inc. is updating its portfolio with high-end shoes, handbags, jewelry, eyewear and fragrances.

The products will be sold at the St. John boutiques inside upscale department stores as well as at the company’s new retail shrines, which range from a store in a classy Las Vegas hotel to an outpost in the chic Ginza district of Tokyo.

The move into luxury lifestyle territory reinforces St. John’s position as a highly visible international corporation. Through its luxury lifestyle focus, St. John will increase its shoes, handbags and accessories offerings by 43 percent this year, the company said.

“I think St. John can make the transition from traditional fashion house to luxury lifestyle brand very easily as long as they keep the line looking modern and fashion-forward,” said Frank Doroff, executive vice president of ready-to-wear at Bloomingdale’s.

With upscale apparel starting at about $1,100 for a signature suit, St. John, based in Irvine, Calif., has become a Southern California luxury apparel powerhouse. The company, which has 5,040 employees worldwide, owns five production plants and generates sales exceeding $370 million a year out of showrooms in New York, Hong Kong and Dusseldorf, Germany.

St. John Collection and St. John Couture offer conservative clothing with feminine details for 30- to 65-year-old women at the company’s namesake boutiques and instore boutiques at upscale department stores such as Neiman Marcus, Saks Fifth Avenue and Bloomingdale’s. In recent years, the line has grown to include St. John Sport for casual clientele, as well as a small but lavish apparel collection for children.

St. John is expanding its portfolio to cater to its loyal and often high-profile customer base, company executives said. Some of America’s most career-minded women—including National Security Advisor Condoleezza Rice, U.S. Sen. Hillary Rodham Clinton, U.S. Rep. Loretta Sanchez and anchorwoman Diane Sawyer—wear St. John’s apparel.

“I’m a strong woman, but St. John is my weakness,” said high-profile Los Angeles attorney Gloria Allred in a recent interview with the California Apparel News. Allred, dressed head to toe in St. John with a coordinating St. John handbag, said the label instills a sense of confidence in her that she doesn’t feel with other apparel brands.

“That’s all I wear 99 percent of the time,” she said. “I’m not a fanatic. It’s just something I feel comfortable in.”

Part of St. John’s new strategy is to infuse a fashion streak into the lines and market the brand to an affluent fashion-forward consumer while updating the existing customer’s wardrobe. To do this, St. John has to figure out how to shed its traditional reputation and slip into a more fashion-savvy consumer image.

The second generation

The most recognized member of the Gray family is Kelly Gray, St. John’s signature model, co-chief executive officer, co-president and creative director and the daughter of the company’s founders. She’s the mastermind behind St. John’s marketing department. When the 37-year-old isn’t traveling around the world on months-long photo shoots or making in-store appearances, she is juggling her duties in the design room, overseeing product development, handling retailers’ accounts and making plans for St. John’s next marketing effort.

Design-wise, her influence is felt throughout the collections, especially with the recent addition of denim looks to St. John’s lineup. Under Gray’s creative direction, St. John’s design team has retooled the existing collections, adding edgy details such as frayed hems for a torn and tattered look on otherwise conservative styles. The accessories line has grown to appeal to a luxury brand shopper with chic, elegant pieces such as crystal clutch bags, crocodile pumps with matching handbags, and jacquard dog carriers with patent-leather piping.

“There is definitely a push for us to bring the average age of our customer down,” Gray said. “But we would never want our core customer to feel like she’s not our main focus.”

St. John is also testing the waters in other categories. The company entered a swimwear licensing agreement with Raj Manufacturing Inc. in Tustin, Calif., last fall. Lingerie and sleepwear may be on the horizon to explore, according to the company.

Maintaining control

The Gray family entered the apparel business 42 years ago, when family matriarch Marie Gray created the company’s signature knit dress in the family’s former home in the San Fernando Valley.

Behind St. John’s carefully manicured image is a tightly controlled, no-nonsense family-run operation. At one point, St. John sold shares of its company stock on the New York Stock Exchange. However, shareholders’ demands to grow the label beyond its capacity made the company rethink its strategies. In 1999, the Gray family formed a partnership with Vestar Capital Partners in a $522 million buyout that took the company out of the public market. Vestar/Gray Investors LLC now owns 93 percent of the company’s stock.

In some ways, the pressure St. John executives felt when the company was public have not gone away, said Bruce Fetter, St. John’s co-chief executive officer, co-president and chief operating officer. “We still have a responsibility to the owners of the company to make sure that we continue to grow the business and grow it in a very thoughtful way,” he said.

Fetter is in charge of finance, real estate, administration, retail and production. Under his watchful eye, St. John has increased its manufacturing productivity 6 percent each year by integrating enterprise resource planning technology, which reduces lead time from eight weeks to four weeks. Fetter also spearheaded a program that calls for shorter production cycles and lean manufacturing.

Global company, local strengths

In a large warehouse on the back lot of St. John Knits’ modern Orange County headquarters, several hundred workers operate knitting machines, print fabric and carefully add touches of paillettes to finished apparel. The facility produces a knit fabric called “Santana,” named after the Santa Ana winds, and churns out 4,000 knit suits daily.

Besides maintaining a relentless focus on quality, St. John has fine-tuned productivity in design and manufacturing. For starters, St. John cross-trains its employees to perform a variety of production tasks—from operating knitting machines to doing fabric printing and detail work. It’s the kind of flexibility that allowed the company to pare back its workforce by about 20 percent last year.

Almost every aspect of St. John’s knit production is in-house. Sportswear pieces are made at the company’s manufacturing plants in the California communities of Irvine, San Ysidro and Alhambra and in Tijuana, Mexico.

St. John also relies on the expertise of contractors in foreign countries. Wool dresses are produced in the United Kingdom, cashmere sweaters are produced in Asia, and leather sportswear pieces are produced in Italy.

Striking a balance between productivity and global expansion without denting the bottom line is a concern for the company, which reported that sales climbed $7.9 million in 2003 to $370.1 million. St. John’s net profits, however, shrunk by about 38 percent to $14.9 million.

The downturn reflected costs related to St. John’s global expansion, Fetter said. Last year, the company opened flagships in Beijing, Tokyo and Vancouver, Canada, and its first St. John Sport boutique at The Venetian Resort Hotel Casino in Las Vegas. St. John plans to open another sport boutique in Tucson, Ariz., this fall.

To alleviate cost pressures, St. John shuttered all six of its home concept stores last year and entered a partnership to sell its namesake home product at Neiman Marcus department stores.

Fetter insists such retail vision is beginning to pay off. Same-store sales were up 13.3 percent for the first quarter of this year, compared with the same period in 2003, he said.

Luxurious competition

Being an exclusive luxury apparel maker has helped St. John retain a loyal customer base. Expanding St. John’s product categories may help the company tap into a highend, fashion-savvy consumer base, but will it allow the company to keep up with luxury competitors such as Louis Vuitton, Gucci and Dolce & Gabbana?

“From a consumer standpoint, I think that when they see the new products we have to offer, they will be thrilled,” Fetter said. “We’re competing with that same customer who may be choosing to spend $1,000 on a Louis Vuitton purse or $400 on a pair of Manolo Blahnik shoes. Our strategy is to ask, ’What is she buying that we’re not selling?’”