Byline: Lisa Lockwood

NEW YORK — In a surprising development, Jay Margolis will leave Esprit de Corp., the San Francisco-based diversified apparel company where he served as president and chief executive officer.
Margolis, 50, joined Esprit in January 1996 and had been in the midst of rebuilding the once-red-hot label, which had experienced several turbulent years and volume erosion in the early to mid-Nineties.
Sources said Margolis decided not to renew his contract, which expires Jan. 8, 2000. The company indicated he will stay on until then to help in the management transition.
“It has been an amazing four years,” said Margolis, in a statement. “The opportunity to take a brilliant brand and revive a segment of our industry was a great challenge. I have accomplished what I set out to achieve at Esprit and now it is time to move on to other pursuits.” Margolis reportedly plans to retire from the fashion industry and move back to New York.
His successor hasn’t been named yet.
According to sources, Margolis and the Esprit board didn’t agree on the future direction of the company. Reportedly, Esprit was not recovering fast enough for its majority shareholders. Controlling interest in Esprit was sold in 1996 to Oak Tree Capital Management and Cerberus Partners, hedge funds in Los Angeles and New York, respectively. Margolis held a minority stake in the business, which he will sell. Officials at Oak Tree Capital were unavailable for comment.
In the early Nineties, Esprit had been a money-losing operation and was fighting a dramatic erosion in volume. Several stores had dropped the line and relationships had to be rebuilt. There had been constant upheavals in management and design, its credit lines had dried up, and its back-end infrastructure was in shambles.
The company, founded in 1968, has sought to reclaim some of the prestige and power it once wielded in the junior sportswear market.
The U.S. business reportedly peaked in 1986 at $600 million.
Margolis set out to regain market share and retailers’ support for the brand. Since joining, Margolis has opened 350 in-store shops for sportswear, accessories and shoes, has revived its dormant catalog operation, developed an online store and signed licensing agreements for swimwear and DKNY Kids.
According to sources, the swimwear license with Beach Patrol has done well, and its DKNY Kids business, which got off to a rocky start last year, is now on track.
While some of Esprit’s initiatives, such as the web site and catalog, aren’t making money yet, they were launched as a longer-term opportunity and as a way to establish a relationship with the consumer, who had lost touch with the brand. Esprit currently has 1.5 million consumers on its mailing list, and its web site gets three million hits a year.
Retailers such as Federated Stores, Dillard’s, May Co. and Dayton-Hudson have increased their business with Esprit, and Margolis has been credited with helping revitalize interest in the junior area in department stores.
Margolis’s strategy was to reinvest in systems, build a manufacturing base, refocus the product in footwear, sportswear, children’s and accessories, tighten product assortments and diversify.
Margolis is leaving at a time when there has been increased attention to the junior floor in department stores. Ralph Lauren launched a young line called Ralph this fall, and Tommy Hilfiger is set to launch a junior sportswear collection in spring 2000. Donna Karan is also introducing a new junior collection this month called DKNY Jeans for the spring 2000 selling season (See related story, page 15).
“When I joined Esprit four years ago, the junior category had lost position to ‘older,’ better sportswear brands and designers, and the vendor base had eroded,” Margolis said. “Our greatest accomplishment was recognizing the demographics of this segment and revitalizing it with a younger product in many categories. Now Tommy, Ralph, DKNY, Todd Oldham and others are viewing this niche differently and the stores are increasing the needed space.”
This year, Esprit expects to generate a total wholesale volume of about $360 million. In 1998, Esprit posted an overall volume of $320 million, compared with $280 million for the fiscal year ended June 30, 1997. The year Margolis joined, the firm was generating about $250 million in wholesale volume. Esprit converted to a calendar year for 1998. The business is said by sources to be operating in the black.
Prior to joining Esprit, Margolis was vice chairman of Tommy Hilfiger U.S.A. and before that he was vice chairman of Liz Claiborne Inc.