Escada, an international fashion designer and apparel manufacturer, has bought 80% of St. John Knits, the Irvine-based maker of classic knit dresses and suits.
The acquisition, completed Nov. 15 for an undisclosed cash sum, will enable the family-owned St. John to develop its own chain of boutiques, said Bob Gray, chairman and chief executive of St. John.
"Everybody has to get bigger--particularly in the garment field--and retailers are getting weaker," said Gray, who with his wife Marie launched St. John 27 years ago. With the rash of mergers and closings among major and specialty retailers, Gray said, St. John "could have a problem with our distribution in the future."
Gray said he expects St. John boutiques to grow from a single location in Palm Desert to 20 to 30 stores within three years. Much of the new store development will be in Europe and the Pacific Basin--notably Hong Kong, Singapore, Seoul and Hawaii--where St. John has virtually no outlets now, Gray said.
Gray and his wife, who is head designer, both have three-year contracts and will remain at St. John. In addition, Bob Gray will join Escada's board and Escada's chief executive, Wolfgang Ley, will join St. John's board.
The purchase is the first American acquisition for 13-year-old Escada AG, a Munich-based maker of ready-to-wear designer sportswear and accessories for women. Escada, which is publicly traded in Germany, had sales of $361 million for the fiscal year ended Oct. 31--more than six times those of St. John Knits.
St. John began as a knit-contractor in the early 1960s after Yugoslavian-born Marie Gray spent $450 on a knitting machine and convinced her future husband that selling her fabric would finance their honeymoon. Today, St. John employs 1,200 people and does all of its spinning, twisting, yarn dyeing and garment construction at six California factories.
The manufacturer is known for its sleek, padded-shouldered knit suits and dresses. St. John produces under the St. John and Marie Gray Sportswear labels, with prices ranging from $400 to $1,000.
Sales for the firm reached $55 million for fiscal 1989 ended Oct. 31, up 27.9% from the prior year.
St. John is Escada's third purchase since 1987, when the German firm acquired majority interests in two West German women's apparel firms.
With 17 stores in the United States, Escada gives St. John the benefit of its marketing skill as well as the German company's expertise in identifying potential markets, said Lawrence C. DeParis, vice president of finance with Escada (USA) Inc., the American subsidiary in New York. "St. John without question will run very autonomously," DeParis said. But Escada "perhaps can help St. John with potential new lines or other expansion possibilities."