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Gap Inc., Intermix in Talks for Deal

The specialty store hired investment banking firm The Sage Group to explore its options on how to fund an expansion plan.

New York-based Intermix has 33 stores in the U.S. and Canada.

Intermix, which has been looking for a strategic partner since August, is currently in discussions with Gap Inc., WWD has learned.

This story first appeared in the December 14, 2012 issue of WWD.  Subscribe Today.

The specialty store hired investment banking firm The Sage Group to explore its options on how to fund an expansion plan.

Khajak Keledjian, founder and chief executive officer of Intermix, said Thursday, “Intermix is currently in discussions with Gap Inc. We are excited to potentially align with this iconic retailer to capitalize on the significant growth potential within the luxury market. As we are in the midst of the due diligence process, we cannot comment further.”

A spokesman for Gap said, “Gap Inc. is currently in discussions with the owners of Intermix, a leading multibrand, luxury retailer with stores in major cities in the U.S. and Canada. We’re excited by the brand’s business model and strong customer loyalty. And the luxury market offers significant growth potential within retail. Given that we are in the midst of the due-diligence process, it is too early to comment further.”

It wasn’t immediately clear how a partnership would be structured, or even how long the due-diligence process would take. Sources said the two are exploring different possibilities, and are not ruling out an acquisition.

Intermix specializes in contemporary apparel and accessories that are both feminine and luxurious, and showcases them in its stores by look and lifestyle rather than by brand or category. It’s the lifestyle focus on merchandising, particularly at the local store level, that seems to have brought back the consumer following the downturn in 2008, when the economy tanked and Intermix found itself in turnaround mode.

The chain works with 220 brands, although not all are represented in each store. Some of the designers found at Intermix include Willow, Milly, Vince, Gypsy 05, Stella McCartney, Rachel Zoe, Rag & Bone, Helmut Lang, Matthew Williamson, Bella Luxx, Alexis Bittar and 10 Crosby. It mixes established luxury designer labels with up-and-coming brands.

The 19-year-old chain, founded by Keledjian and his brother Haro, opened its first store in Manhattan’s Flatiron District. Intermix now has six stores in New York, with a seventh on the Bowery slated to open this spring. There are 33 stores in total, including an international location on Bloor Street in Toronto.

The company is profitable, according to financial sources. They said the company’s been having double-digit comparable-store sales growth and had an annual volume of between $125 million to $150 million in 2011.

In an ideal world, the New York-based firm is hoping to connect with a partner that has a bigger platform either in the U.S. or internationally, with the goal toward working together on expanding Intermix’s footprint. The company hasn’t ruled out the possibility of working with a partner that also has some sourcing experience that can help Intermix launch its own private label.

That’s where Gap could come in and provide some expert merchandising and retail know-how, whether across the U.S. market or internationally, and even in the e-commerce arena, presuming the parties are able to reach an agreement.

Gap, too, has seen a resurgence recently, after years of being criticized as boring and losing touch with what its consumers want in fashion.

The $15 billion San Francisco-based retailer has been in turnaround mode for more than a decade. It posted third-quarter earnings in November in which net income jumped 60 percent from last year and second-quarter profits in August that rose 29 percent from a year ago, results that suggest Gap has finally found its groove again.

Gap operates the Gap, Old Navy, Banana Republic, Piperlime and Athleta nameplates.

Glenn Murphy, Gap’s chairman and ceo, said in November that, since spring, the Gap division’s elevated denim offering has driven the overall business and has been bringing in the right customers. Also doing well were Gap’s baby business; men’s and women’s suiting at Banana Republic, along with woven tops and, at Old Navy, denim, specifically the “rock star” jean, and the kids business, he said.

Murphy has been with the company since 2007.

Gap also has a sizeable presence internationally, particularly in London, Paris, Milan and Rome in Europe, and in both China and Japan in the Far East.

Gap has experience in nurturing a brand in its early development. It acquired Athleta in 2008, then primarily a catalogue business that has since grown to include online and retail store operations, while keeping the integrity and culture of the brand’s viewpoint.

Shares of Gap rose 0.1 percent to close at $31.47. The stock price has risen 71.2 percent from a year ago.