WWD.com/business-news/business-features/new-era-mcmahons-agenda-for-st-john-469889/
government-trade
government-trade

New Era: McMahon’s Agenda for St. John

It's a new day at St. John. Glenn McMahon, who was named chief executive officer in September, wants to evolve, rather than revolutionize, the $400 million...

IRVINE, Calif. — It’s a new day at St. John.

Glenn McMahon, who was named chief executive officer in September, wants to evolve, rather than revolutionize, the $400 million brand while maintaining its strong DNA.

McMahon said in at interview at company headquarters here that his agenda includes focusing on product, revamping domestic retail stores, growing the international business and expanding into nonapparel categories.

“We are not going to be making any crazy declarations,” McMahon said as he prepared for St. John’s runway show tonight at the Orange County Performing Arts Center. “It’s really an evolution. We have gotten some good results from some of the resort product that is retailing now. The truer colors and more graphic knits continue to perform quite well and the evening category overall continues to be very strong.”

McMahon, 49, former president of Dolce & Gabbana USA, said, “St. John continues to have so much potential, and in 2007 it really showed the resilience it has coming off a really difficult 2006.”

Acknowledging that “everybody is very nervous about 2008,” McMahon said, “we have the fundamentals back in place. If we had not been able to regain the market share that we lost in 2006 we would be worried right now. But we are in good shape even though it is going to be a trying year. We are conservatively working on retooling the brand and by going at an intelligent pace we are setting ourselves up for continued success. Our retail store comps have been up nice double digits and our retail partners have improved over the last year pretty significantly.

“We have returned to the core of St. John, work started by interim chief executive officers Bruce Fetter and Phillip Miller,” he said. “It was an important return to normalcy, and so for the past six months we’ve been focusing on how we continue to grow.”

That normalcy includes co-founder Marie Gray and her daughter, former creative director Kelly Gray, who are back, along with several executives.

McMahon said the big lesson from 2006, when the company struggled to recover losses suffered during Richard Cohen’s 18-month tenure as ceo, is that St. John moved to quickly and too far away from its core business.

St. John had shrinking profits and sales before Cohen’s arrival in 2004, and the situation was exacerbated by his strategy to entice younger customers with a new fit. Many newer styles met resistance from loyal and mature customers.

Cohen hired Angelina Jolie in 2005 to be the advertising face of the brand, the role that Kelly Gray had for more than 20 years, when St. John’s ads always spoke in memorable imagery. Jolie will make her last appearance in the black-and-white March ads shot by Mario Testino. The new campaign will feature a model, and will return to the vibrant color images of the Kelly Gray era.

In addition to the return of the Grays in consulting roles, the company rehired longtime executives, including Fetter, now chief operating officer, and Maria D. Lopez, vice president of design. Last week, George Sharp was named executive vice president of design, a new post, a day after resigning as vice president of design at Ellen Tracy. St. John also made key hires of chief merchant Lowell Breving and executive vice president of retail Richard Chilcott.

During McMahon’s tenure at Dolce & Gabbana, where product was the focus, the fashion house renovated and expanded its retail operations, which the new ceo plans to implement at St. John.

“Product is king and obviously the most important thing for us,” he said. “The Grays are back as consultants and that relationship will continue….Their sense of perspective and history of the brand is so critical to how we define ourselves.”

For her part, Kelly Gray has said having McMahon on board is “inspiring and “a breath of fresh air.” Part of her focus has been designing new, modern products that maintain the St. John ethos.

Evening represents about 20 percent of St. John’s business and McMahon sees growth potential, especially with drivers like novelty specialty knits.

“The customer is looking for fashion relevant product for St. John, which I think is so critical, and where we’ve played it too safe we haven’t seen the positive results,” he said. “Where we’ve stepped it up a little still in keeping with the brand DNA, we have seen encouraging results.”

With almost 4,000 employees based mostly in California, St. John is among the leading single employers in Orange County. Its all-American image, which at times has hurt business, is now seen as an asset in the luxury market.

“The Made in America label is really important for St. John,” McMahon said, “and as we continue to look at expanding our product categories beyond knits we will explore sourcing opportunities outside of the United States, but we’re not planning a dramatic change there….We are also not as vulnerable to the fluctuations in currency, meaning we’ve been able to hold our price position for St. John in a more consistent range, while a lot of European luxury brands have seen pretty dramatic increases.”

Less than 10 percent of products, including some silks and woven pants, are sourced abroad.

After product, McMahon’s priority is St. John’s domestic retail operation. With the hiring last September of Chilcott, St. John is looking to fine-tune operations in its 28 domestic stores and 13 outlets. McMahon said that the company can “easily double that amount in the next three to five years.”

Another initiative is international growth, with an emphasis on emerging markets of China, Dubai, the Mideast and Russia. “We’ve had a really nice year in the Far East and will continue to work more in China and are poised for significant growth there,” he said. “We are also reexamining how we are set up in Europe. We currently run that business out of New York, but it would probably be more beneficial for us to have a stronger presence on the ground in Western Europe.”

And expect to see a greater emphasis on evening pieces in tonight’s runway show.

“We do [evening] really well, it’s a great price value proposition and the rest of the world is recognizing it,” McMahon said.

Average price points in the evening category range from $1,295 to $2,795, while Collection pieces range from $450 to $1,300; Sport from $300 to $600 and Couture from $600 to $2,000.

St. John’s eveningwear is primarily knit driven, with a strong business in cocktail dress, dinner suits and evening jacket business, but McMahon pointed out that one of the strongest categories over the past 12 months has been evening separate tops, such as knits with sequins or paillettes.

“As more people are entertaining at home that’s a big category we see emerging,” he said. “And they are crossing over into the day, too.”

While McMahon said the company dabbles in red-carpet gowns (St. John dressed Jaime Pressly for her Emmy victory last September), the greater emphasis is on dressing Hollywood’s power executives, a program beefed up by its sponsorship of The Hollywood Reporter and Lifetime Television’s Annual Women in Hollywood breakfast.

McMahon also wants to develop licensed nonapparel categories, which ceased during Cohen’s tenure. During the fourth quarter, the company had been conservatively piloting the reintroduction of costume jewelry and shoes in some of its stores.

“It’s a really nice complement to our ready-to-wear and it fits into our international expansion also,” he said. “That’s really the missing link in international. So many of the players that have successful global luxury businesses are done mostly on accessories. So it’s critical for us to get that on track.”

Mirroring the hardware on its rtw pieces, the gold cuffs, pearl and maltese pieces range from $395 to $595. Shoes, including driving moccasins and pumps with gold heels, range from $295 to $595. Next month, the company will also introduce handbags and eyewear, and will relaunch its signature fragrance over Mother’s Day in May. While it is beginning with its built-in boutique customer, the long-term plan is to wholesale the brand expansions as well.

Regarding St. John’s distinctive advertising image from years ago, McMahon said: “I don’t know that we are going to be running around the globe again, but that sense of adventure, excitement and discovery is really critical, so we will look to recapture that.”

But before that happens, the company will revamp its retail stores, working with Randall A. Ridless architects, to create a more residential, warm and luxurious shop. A prototype should be done by this fall and will likely be installed first in Bal Harbour and Palm Beach, Fla., with South Coast Plaza in Costa Mesa, Calif., and New York to follow in 2009.

Board chairman Jim Kelley praised McMahon as a special talent.

“Ceo’s in this industry tend to fall into one camp or the other in terms of being more operational or financial,” he said. “Often it’s difficult to get one person who has both management skills and creative product skills. I pinch myself that we got lucky enough to find Glenn.”

Kelley also said McMahon’s arrival “was a very positive experience for the Grays. It caused them to want to stay engaged. He also has a great eye for talent, so while we have most of our starting lineup in place I expect him to add a few more new faces to the huddle.”