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St. John Eyes Overseas, New Product Categories

Glenn McMahon, chief executive officer, and Ralph Toledano, the brand's new chairman, discuss their growth strategy.

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St John's Manhattan flagship store.

St John's Manhattan flagship store.

Kyle Ericksen

St John's Manhattan flagship store.

St John's Manhattan flagship store.

Kyle Ericksen

St. John may be approaching the big 5-0, but it’s feeling younger than it has in years.

Having survived a midlife crisis five years ago, the $400 million Irvine, Calif.-based brand has emerged re-energized, winning back loyal customers and developing new ones.

“We’re in the process of turning the business around. We will celebrate our 50th year in 2012. This is a very significant business, and it’s been a very methodical turnaround. This is an evolution and a transformation of the brand that we began in earnest four years ago when I joined the company. We’re pleased with the progress we’re making,” said Glenn McMahon, chief executive officer, who was interviewed with Ralph Toledano, who was named chairman of St. John in August.

While Toledano is based in Paris (he’s been to Irvine three times since joining), the two men got together in New York last month to unveil their newly renovated Manhattan flagship on Fifth Avenue and 53rd Street, where they showcased the spring 2012 St. John collection.

Turning around a business of this size is no easy task, and the pains associated with it were plentiful. Prior to McMahon’s arrival, the company went through a rocky time. In an effort to shore up lagging profits and reach a younger customer, St. John hired Richard Cohen as ceo, who made sweeping changes in design, fit, pricing, management and advertising, and their abruptness wreaked havoc on the business. He was succeeded by interim ceo Philip Miller. McMahon was hired in 2007 to make slower, more methodical changes, without alienating St. John’s core customer base.

“We still have a lot of work to do,” he admitted. “But we are very confident in the direction we’re heading in. First and foremost was our attention to product and getting the product right. We’re getting a very good response from the consumers on the new direction of the product.”

The spring 2012 collection has a Seventies vibe, featuring tailored blazers paired with slouchy trousers, long sweater dresses, trapeze-shaped knit gowns and sexy, long-sleeve floor-sweeping knit dresses.

Toledano comes to St. John after a successful 11-year tenure as chairman and ceo of Chloé International, bringing a global perspective as well a major experience in brand extensions and overseas markets. Since his arrival, he and McMahon have been formulating a strategy as to where they want to take St. John over the next three to five years. “There is a team in place and it is working really well. We try to identify what are the main priorities,” said Toledano, who succeeded Vestar president Jim Kelley as chairman. “Number one is product. Number two is St. John has a very important network of 26 fully-owned stores. Some progress has been made, but there is room for improvement. Third is marketing and the slow re-branding of the St. John name. Fourth is international and fifth would be brand extension.”

Both executives agree that product is the main priority. The company has always been known as a knit manufacturer and built a solid reputation on the Santana knit. “Over the years, it became less and less important as part of the product mix,” said McMahon. “We have spent a lot of time in the last three years on knit innovation.”

The company has been working primarily with a Milano double-knit, which McMahon called “the Santana of the future.” The firm introduced it a few seasons ago. “It’s much more lightweight. It drapes and has the properties of woven fabric. It’s not as structured,” said McMahon.

While St. John is eager to stay true to its heritage, it has also pursued nonknit categories “and we’ve had some terrific success on that,” said McMahon.

So who exactly are St. John’s customers these days?

According to McMahon, they are largely professional women. The company’s focus is the Collection, followed by its evening business. The firm also has a casual lifestyle business under the Yellow label. “That’s a healthy business for us also, but the smaller of the three businesses,” said McMahon. “Our appeal is our clothes are investment dressing. One of the reasons we always had professional women as customers is they appreciate the fact that we’re not telling them something one month, and telling them to get rid of it the next.”

While St. John executives don’t like to talk in terms of age, they speak of a woman’s lifestyle. “Women, if they’re 50 or 60, are pretty young today,” said McMahon. “Women today want sportswear separates. They don’t wear suits. They want versatility in their wardrobes. They want to be able to wear a great dress to the office with a jacket, and then take the jacket off and wear it out that evening with a necklace or a pair of earrings.”

He noted that while the company isn’t out to dress the 20-year-old customer, there are a handful and he’s also seen women in their mid-to-late thirties who have discovered St. John recently. “They’re a growing part of our outreach from a customer standpoint. Because we feel if we can capture these women now, we can have them for [many years to come].”

Historically, St. John has been known for its fit, and when the previous management made adjustments to it a few years back (making the cut slimmer and more severe), they got plenty of complaints, and reacted quickly. “We have a great fit. There are lot of designer brands women look at and when they try the clothes on, they’re not for their body types,” said McMahon. He noted that featuring Kate Winslet in the fall advertising campaign has been met with positive feedback. “They love her because she has a real woman’s shape and real curves. She’s not a big woman, but the clothes look fantastic on her. A lot of women relate to that,” said McMahon.

Since the St. John customer spends a lot of time on her computer, e-commerce has emerged as a key opportunity for the brand. The company has an e-commerce business with its wholesale partners, but is in the process of redesigning its Web site, and will take fulfillment in house. Laird + Partners is designing the Web site, which should be completed by mid-2012.

One way in which the brand develops new customers is by bringing them into the store for philanthropic or social events. For example, St. John partnered with Tina Brown of The Daily Beast and did a St. John series. It invited guests such as Madeleine Albright and Marlo Thomas to speak to clients. “They’re rather intimate events. We’ve reached out to a number of law firms and have them in for wardrobe events with George Sharp, the creative director. What we’ve found is women don’t have time to shop, and they need help. They want a stylist. If you can provide that level of service to them, the rewards are really terrific. We’ve been able to get a lot of new customers to cross the threshold for the first time after seeing the merchandise at one of these wardrobing events,” said McMahon.

Another key initiative is expanding the international business. Presently, international accounts for 20 percent of revenues, and Asia represents the lion’s share of that. Today, St. John has 15 freestanding boutiques in China, operates two company-owned stores in Hong Kong and has shop-in-shops at Lane Crawford, and manages a wholesale business in Korea through Shinsegae International Group. In Japan, St. John has a company-owned store in Ginza and shop-in-shops within its wholesale distribution.

McMahon sees opportunities in Asia, as well as Europe, Russia and the Middle East. St. John launched in Harrods in 2008, which has been successful. He said the company already sells Tsum in Moscow and will open a shop-in-shop there in December, as well as one in St. Petersburg in February. The company opened a boutique in Dubai Mall last December, and the business continues to be very good. The company hasn’t put down stakes in Paris yet. “We’re hoping Ralph [Toledano] can help us,” said McMahon. “Paris is definitely an important next step for us.”

St. John, positioned at the opening price point of the designer market, considers Armani Le Collezioni, Max Mara and Piazza Sempione as competitors, McMahon said. He is somewhat positive about current business. The company presently has more than 200 points of distribution in the U.S., which account for over 60 percent of the overall business. “We are planning significant growth year-over-year,” said McMahon, adding that he expects freestanding boutiques and international business to lead the charge.

Last month, St. John unveiled its newly renovated 5,000-square-foot New York flagship designed by O’Neil Langan Architects, and there are plans to remodel the Beverly Hills and San Francisco units in the next year. In the past year, the company also remodeled the Manhasset and South Coast Plaza boutiques. St. John believes the store experience is essential to the company’s re-branding. Previously, the stores had blond wood with black accents; now the color scheme is more feminine tones of silver and platinum. The original concept was designed more than 10 years ago, “and as you know in retail, it seems like every three to four years, you need to change it up,” said McMahon. Now, he said, “There’s a real lightness of being to the store. There’s a real spacious quality we wanted to capture.”

Extending the St. John brand into nonapparel categories is also underway. Toledano said they’d like to launch leather goods, shoes, jewelry and a fragrance. “We’re going to pilot nonapparel categories over the next couple of years through the St. John boutiques,” said McMahon. “We’ll test the waters, if you will. We’re just starting an initial pilot of the [costume] jewelry in St. John boutiques. We’re manufacturing the jewelry all over the world. We have an in-house designer, Neville Ward, that we brought on. ”

By all accounts, it appears the relationship with McMahon and Toledano has gotten off to a strong start, and they seem to have similar goals for the business.

“I was really excited when Ralph joined the board and when he was subsequently named chairman of the board,” said McMahon. “We do share the vision that this is a fashion house, and product is first and foremost. To have a partner that really understands the business as he does, that can really add value, and he has from Day One. We have ongoing conversations multiple times daily; we’re in constant contact. I think that Ralph brings a breath of fresh air actually to the process because of his experience internationally and in categories, in addition to ready-to-wear, in nonapparel. I think that we’re kindred spirits.”

Toledano is intrigued with the challenge of rejuvenating a major brand. “First of all, I think this changing evolution of the brand name is definitely the most difficult exercise in the fashion industry,” he said. He explained that very often, once the original designer is gone, most brands die. “Institutionalizing them is a very interesting exercise. It’s all the more difficult when you’re big. If a brand is dead, and you try to revive it, it’s much easier to rejuvenate because you have no business. When you have a several-hundred million dollar business, making this evolution is very difficult and at the same time fascinating. I was attracted by this aspect.”

Another reason he was attracted to the job was the people he met at St. John. “I’ve known Vestar, which is the major shareholder, for a long time. I met with Glenn and we have the same passion for fashion, which helps. All the people here are very committed. They’re very interested in what kind of experience I can bring. I’m very much about people. All my life has been about building teams, and having this working atmosphere which makes things happen,” said Toledano.

McMahon gave much of the credit to Sharp, the creative director and executive vice president of design. “George has been with St. John just shy of four years. We had previously worked together. He’s really done an excellent job in moving the brand forward. We had a large business to protect. One of the things we wanted to make sure is that we didn’t jeopardize or cannibalize our existing business.”

Toledano added: “I think [George] is very smart, he’s talented. He’s an excellent listener. He really listens to the market’s request. And he’s also able to translate in an artistic way. He’s a really great business partner.”

Retailers concur that customers are responding well to the collection’s new direction.

Jennifer Wheeler, vice president, women’s designer apparel at Nordstrom, said the St. John collection last spring and this fall has been trending ahead in sell-throughs versus a year ago, and customers have noticed a positive change in direction. “The collection has a broader appeal than in the past. We are consistently introducing new customers to the brand, and, yes, some of them are younger or hadn’t shopped the collection before.”

She said customers have responded to many of the collection’s new elements. “Some of the bestselling categories have been dresses, woven blouses, and their great-fitting pants. The customers are loving the new Milano dresses, and gowns, the liquid satin shirts and the modern slim fit Emma pant in grey flannel,” said Wheeler.

Colleen Sherin, senior fashion director of Saks Fifth Avenue, noted that St. John continues to be a very important brand for the retailer. “They have managed to satisfy the needs of their core customer, while acquiring a new customer through design direction and a marketing campaign that is trend-right and more youthful in spirit.

“Over the years, it has successfully evolved from a primarily knit-driven collection into a complete collection that covers all aspects of a woman’s lifestyle — from day to evening to casual weekend wear. These are clothes that suit the reality of women’s lives,” said Sherin.

Ken Downing, senior vice president and fashion director of Neiman Marcus, also believes the collection is drawing in new customers.

“Our customers have been very enthusiastic about the new direction of St. John. The St. John management and design team were respectful of the house’s heritage and the loyal customer base,” said Downing. He said St. John was sensitive to not alienate the existing customer, but understood it needed to modernize to attract a new one. “The collection focused on the strengths of the house and added an expanded selection of woven options as a category, updated silhouettes, and injected high fashion trend to the mix combined with a sophisticated and modern advertising campaign,” he said. These moves have proven successful for the brand at retail, he noted.

According to sources, St. John generates about $400 million in total sales. McMahon said even during the recession, the business has always been profitable. Right now, there are no plans to open many more stores domestically. “We are in all the major markets currently. There’s not a city in the U.S. we’re not in that we want to be in. There’s a possibility to open a second store in a city, like New York.”

While the company has a store in Vancouver, it might consider Toronto and Montreal down the road. However, McMahon added, “We have a lot of work in the U.S. before we would look to Canada.”

But having a newly renovated New York flagship that really speaks to the essence of the brand is of most importance to both executives.

“The store is a really big and important moment for the brand. Now for the first time in New York, which is an international capital, people can come through and see how the experience and the product tie together, and really speak about the evolution and transformation of the brand better than anything we could possibly do,” said McMahon.

 

 

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