The transaction closed Dec. 31. The deal expands Gap’s presence in the growing global luxury retail market and comes at a time when the $15 billion San Francisco-based retailer, which has been in turnaround mode for more than a decade, seems to have found its groove again. It posted third-quarter earnings in November in which net income jumped 60 percent from last year.
Intermix’s senior team of Khajak Keledjian, cofounder and chief executive officer, and Adrienne Lazarus, president, will continue to operate the business from New York. Keledjian moves over to the role of chief creative officer. Both report to Art Peck, president of Gap’s Growth, Innovation & Digital division. Peck spearheaded the acquisition, working with Glenn Murphy, chairman and ceo of Gap Inc.
“Intermix has a distinctive position in this growing market with clear competitive advantage,” said Murphy. “Their record of merchandising with a keen eye towards mixing multiple designer labels, complemented with exclusive product, is appealing to their loyal customers. This strategy reflects the strength of their brand vision and leadership team.”
Keledjian expressed pleasure at the deal, adding Intermix has “found a partner that has the global scale and infrastructure required to support our vision for growth.”
In August, when WWD first reported that the 32-unit specialty chain had hired investment banking firm The Sage Group to help it find an investor, Keledjian said that among its plans for growth are the expansion of its store base domestically and internationally; the introduction of its own private label; a foray into the men’s category, and a bigger online presence. Internationally, the company has one store in Toronto, on Bloor Street.
For now, the plan is to determine the priorities.
“Our [immediate] priority is growing the [core] business, increasing comp sales and adding new stores. There are a lot of opportunities out there, but we really have to first prioritize over the short term,” Keledjian said, noting that international expansion and private label are really longer-term goals.
The specialty chain’s seventh New York store, located on the Bowery, is slated to open this spring. Other locations slated for openings this year are Brooklyn, N.Y., and in San Francisco and Montecito, Calif.
The 19-year-old chain was founded by Keledjian and his brother Haro. According to the chief creative officer, his brother’s role has been centered on the operations side of the business. For now, Haro will continue with the company and help with the transition. Many of the new areas where Intermix will reap the benefits of being under Gap’s umbrella are on the operations side. As the two firms complete the transition to Gap’s umbrella, they will figure out what Haro’s role will be, Keledjian said.
While many other retailers were having a ho-hum holiday selling season, Intermix posted strong sales due to its loyal customer base.
“When the product is good, we don’t have to promote a lot. We give them what they want,” Keledjian said.
The chain works with more than 220 contemporary apparel and accessories brands, although not all are represented in each store. Some of those brands include Rag & Bone; A.L.C. by Andrea Lieberman; Helmut Lang; Mason by Michelle Mason; Mulberry; 3.1 Phillip Lim; Yigal Azrouël; Proenza Schouler; Stella McCartney; Jimmy Choo, and Azzedine Alaïa. About 30 percent of the merchandise in the stores is exclusive.
Gap’s infrastructure and ability to support and provide scale to a growing business was a strong selling point for Intermix, Keledjian said.
“We’re always looking for new brands. In partnering with Gap, that will enable us to have more time to focus on growth. One reason for our success is [being] an incubator for new designers and new talent. [Partnering with Gap] will let us focus more on product, merchandising and innovation,” Keledjian said.
Paul Altman, a managing director at Sage, said, “Intermix had a lot of different options that they considered. There was a mix of both strategic and financial buyers, domestic and international, who were interested because the business is doing well. It is profitable and growing fast.”
The banker said Gap was appealing to Intermix because it, too, is a specialty retailer that understands how to grow a business in the sector. “Gap also had a lot of enthusiasm for the deal. They have a strong e-commerce capability that Intermix was excited about,” he said.
After it was learned that Gap and Intermix were in discussions, Gary Wassner, president of factoring firm Hilldun Corp., said, “I think Intermix has a good franchise for what they do. There’s a lot more space for them to expand. Pricewise, they’re in a good sweet spot. Heavier in accessories, they track categories that work for them store by store. They know each week what works for them and can modify their buys. It’s really a great concept store because they target the young girl who is fashionable, but doesn’t want to go to Bergdorf and shop the European brands. I think an Intermix and Gap combination would be a great partnership.”
For Gap, the opportunity to acquire Intermix was one that it couldn’t resist.
According to Peck, “We always have our antenna up in terms of looking at possible deals. We’re picky and we were aware of Intermix for a long time. We admire and respect what they’ve done in terms of the brands that they’ve assembled. When we heard that they were looking for some form of strategic partnership, we quickly responded in October. It made sense and the rest is history. We’re excited about the business model, its brands and growth potential.”
Peck said there’s room for significant growth opportunities domestically for retail expansion. While there’s been far less recognition of the brand overseas, he said tourists are somewhat familiar with the company as many are shopping at the stores when they are in town.
Intermix currently ships products overseas. While the digital capability that Gap can add to Intermix’s e-commerce presence can help grow its name recognition online, particularly on the international front, the opening of stores is still viewed as a necessity, according to Peck.
One reason is Gap’s push into developing a thriving digital business that incorporates the physical store. “We have an omnichannel strategy that we’re putting in place where we bring the Web and the store experience together. Some of our Web orders are shipped from the stores. Customers can find an item on the Web and search for it in stores around [them] to find where it is available. The natural progression is to buy it online or reserve it in the store, and then go and pick it up,” Peck explained.
The Intermix deal is a rare acquisition by Gap Inc., which generally has grown brands in-house. The last purchase the retailer made was Athleta in 2008, and prior to that it had not bought any companies, instead developing such formats as Banana Republic and Old Navy. That doesn’t mean it isn’t always on the lookout — and it has plenty of financial flexibility to do deals. For the third quarter ended Oct. 27, the company said it had $1.8 billion in cash, cash equivalents and short-term investments.
“We do acquisitions in two ways, either proactively or opportunistically.…When Intermix came to us, we moved on it pretty quickly. There are not any right now [that we’re planning on doing], but we have our radar up to see if there are potentially significant opportunities out there,” Peck said.
The president of Gap’s GID division emphasized, “We see lots of things. We’re very picky from the standpoint of the team [leading] the business and the opportunity and fit with Gap.”
Peck also said that while Intermix is a U.S. firm, Gap’s “eyes are open on a global business. The acquisition doesn’t have to be a U.S. brand.”
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast