JAY MARGOLIS HEADING ESPRIT, OPTING OUT OF DEAL ON TRACY
Byline: Janet Ozzard
NEW YORK — Jay Margolis has jettisoned his pending deal with Ellen Tracy and will take the top post at Esprit de Corp., the struggling junior sportswear company based in San Francisco.
Margolis, who signed the Esprit contract Friday and started working in the showroom here Saturday, said Monday that he’s looking forward to getting the once-powerful brand “back on track.”
However, Margolis’s move leaves Ellen Tracy in the lurch.
Gilbert W. Harrison, chairman of Financo Inc., which helped broker a highly sensitive deal for sale of Ellen Tracy to Bain Capital, had called Margolis “a critical part of the strategy.” Margolis reportedly would have been an equity partner in Ellen Tracy, eventually taking over the company’s reigns from founder Herbert Gallen.
Gallen, 80, has flirted with several potential buyers for the $250 million sportswear powerhouse in recent years, but he has been reluctant to give up control of the company.
Harrison said Financo, Ellen Tracy and Bain Capital are now considering “other options.” He would not say if this move meant the deal would not go through.
Ellen Tracy, based here, and Boston-based Bain Capital were closed due to the blizzard, and executives could not be reached for comment.
Margolis, who said he’d be working primarily out of Esprit’s headquarters in San Francisco, noted that he never signed his contract for the Ellen Tracy deal.
“I’ve been working on this [Esprit] deal for six months,” he said. Margolis first met with Susie Tompkins, founder and owner of the company, over lunch at Mad. 61 last summer.
“That was our first meeting, but since then I’ve had dinner with her several times, and she’s been here several times, and we just hit it off,” he said.
Industry reports said Margolis’s post at Esprit is an equity deal, although he declined to comment on that.
At Esprit, Margolis will be chairman and chief executive officer. An apparel industry veteran, he was president and vice chairman of Tommy Hilfiger USA Inc., from July 1993 to July 1995. Before that, he was vice chairman of Liz Claiborne Inc., from August 1984 to July 1993.
“The thing that people forget is that Esprit is a billion-dollar business worldwide,” he said. “The kids’ apparel, the accessories and shoes are all healthy businesses. There are incredible opportunities here.”
Esprit’s total business, including licensing, is about $300 million wholesale. Its junior business is about $120 million. At its peak in 1990, the total business was about $400 million.
A top priority at Esprit will be to bring the “back end” — systems, deliveries, warehouse operations — up to scratch.
“There’s a lot of stuff to be done in that area,” he said. “The mechanics of the warehouses, better systems and so forth. I think at first that Doug [Tompkins, who founded the company with his then-wife Susie Tompkins and ran it until their bitter divorce in the late Eighties] put a lot of money into the front end — image and advertising, and how things looked.”
But, in addition to shaping up the operations end of the company, Margolis said he’d like to make Esprit a more sophisticated look that appeals to the 19-to-25-year-old rather than its current target of 15 to 19. One of the ways in which that can be done is to use Esprit’s offices in other parts of the world and incorporate them into the line, he said.
“In Asia, we have a great business. In Europe, we have a great business. When you go to other countries, it’s amazing how the line looks,” he said. “Here, I feel like they’re influenced by that Los Angeles junior look, the ‘cheap and deep’ mentality. They did that in order to survive.
“I think there’s a great opportunity, with Tommy going into women’s, with Nautica, and Guess and CK, so that retailers really can put together a group of younger and better lines. We’re starting to see a more design-oriented collection rather than all the kiddie stuff. I want to emphasize the global aspect of this — I’m on the plane to Hong Kong next week, and we open the spring season in Dusseldorf after that. I think if we really use the design talent that’s available to us, we can get the company back on track fairly quickly.”
Esprit is currently designed by Marcus Brown, who also did the Susie Tompkins contemporary sportswear line during its last two seasons. That line closed last year after the fall season.
“We have to go back to getting shop concepts, even if that meant fewer doors but deeper,” Margolis said. “I could see doubling the sportswear business over the next year and a half to two years.”
Margolis said he’s also comfortable with Esprit’s debt situation. In December, Cerberus Partners and Oaktree Capital Management bought $102 million of Esprit’s debt.
“I feel very good about the amount of time they’ve given us,” he said.