ST. JOHN’S NET UP 43.1% IN FIRST QUARTER

Byline: Thomas J. Ryan

NEW YORK — St. John Knits Inc. continues to excel, reporting earnings catapulted 43.1 percent in the first quarter ended Jan. 28.
The gains — which shattered Wall Street’s average estimates by 7 cents a share — were driven by continued strong demand for St. John’s knitwear and accessories at wholesale, a 21 percent same-store gain at its retail boutiques and an excellent response to its new St. John Sport casual collection and Tyber by St. John fur line.
Analysts also said St. John is benefiting from recent strength in the high-end market.
Shares of St. John, based in Irvine, Calif., rose 1 3/4 to 61 — an all-time high — Wednesday on the New York Stock Exchange.
Earnings rose to $5.7 million, or 69 cents a share, from $3.98 million, or 48 cents, a year earlier. Wall Street’s average estimate was 62 cents.
The latest quarter included a benefit of $183,000, or 2 cents, due to a workers’ compensation insurance refund.
Sales rose 24.7 percent to $45.3 million from $36.3 million, with retail sales jumping 42 percent to $13.3 million, Gross margins improved to 54.3 percent of sales from 52.9 percent, while selling, general and administrative expenses were reduced to 33.9 percent of sales from 34.5 percent.
Robert Gray, chairman and chief executive officer, said the company’s core knit and accessories lines are “still performing at the highest level.”
In a conference call, Karla R. Guyer, senior vice president of marketing, said ready-to-wear sales at major stores increased 23 percent in the quarter, and ran ahead 24 percent in February. Accessories sales were up 28 percent in the quarter, and jumped 39 percent in February, helped by department stores’ intensified marketing efforts on St. John’s jewelry line.
St. John Sport, introduced in November, achieved “sensational sell- throughs in all major stores.”
Gray said St. John Sport, a french terry fleece line, has “unlimited potential.” She said, “The only problem has been getting enough merchandise to the stores.” The sport line is now in 182 stores and will be rolled out to 250 doors this fall. The company’s core knit collection is now in 336 doors.
The Tyber by St. John fur line, launched during holiday 1995, did “extremely well” in the quarter, generating “high sell-throughs,” Guyer said.
Guyer said the company expects its European business to be up more than 50 percent this fall.
Meanwhile, Gray said the Griffith & Gray woven line has “gone through a retrenching” by pulling out of a number of wholesale accounts, and he expects the line to take a season “to get back on track.”
Gray also said the company has completed the construction of its Beverly Hills boutique. It is the company’s 17th, and the grand opening is set for Tuesday. The company also signed an agreement in the quarter to nearly double the size of its existing boutique on Fifth Avenue at East 53rd Street, here.
Maria J. DeLucia, an analyst at Rodman & Renshaw, said while St. John is “very well managed,” it recently has gotten a boost from a “very strong” demand for luxury goods, partly because of strength in the stock market.
“The high end continues to thrive,” concurred Margaret Whitfield, an analyst at Hancock Securities. “[St. John has] great designs and quality product, and it’s in the right place in the market.”
Analysts now expect the company to earn $2.97 for the year ending in November 1996, against $2.38.
According to its 10K, St. John’s top three customers — Saks Fifth Avenue, Neiman Marcus and Nordstrom — accounted for 52 percent of sales last year, slightly down from 54.6 percent in 1994. Other major customers included Jacobson’s, Bullock’s, Lord & Taylor, Macy’s West, Marshall Field’s and Dayton Hudson.
Its 16 boutiques accounted for 24 percent of total sales in fiscal 1995 and foreign sales, 5.4 percent.
According to the 10K, core knitwear sales last year grew 18.3 percent to $125.4 million while accessories gained 34 percent to $9.3 million. Griffith & Gray, introduced in fall 1994, racked up sales of $6.1 million against $696,000. The St. John fragrance, launched that same season, notched sales of $1.7 million compared to $652,000.
— Fairchild News Service

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