COST OF DEBT DEPRESSES PROFITS AT ST. JOHN KNITS

Byline: Thomas J. Ryan

NEW YORK — Dragged down by interest expenses related to its move to go private last year, St. John Knits reported profits fell 35.8 percent in its first quarter ended Jan. 30.
The higher debt costs offset margin improvement in its core knit line and robust sales in its retail and St. John Sport divisions.
Earnings slid to $3.7 million from $5.8 million. Earnings per share rose to 42 cents a share from 34 cents, reflecting a decrease in average shares outstanding to 6.5 million from 17 million.
In July 1999, the Irvine, Calif., firm completed the repurchase of 93 percent of its outstanding shares in a privatization led by Vestar Capital Partners and the family of Bob Gray, St. John founder, chairman and chief executive. With about 7 percent of its stock still held by the public, St. John continues to report its financial results.
Sales for the quarter gained 8.4 percent to $79.6 million from $73.4 million. Operating profits jumped 50.3 percent to $14.2 million from $9.4 million due to increased sales at both its retail and sport product lines, as well as higher gross profit margins for core knitwear and sport lines. Gross margins improved to 56 percent of sales from 53.9 percent, largely due to improved manufacturing efficiencies.
Sales at its retail division gained 26 percent to $28.7 million, with same-store sales ahead 19 percent. The firm operates 20 retail boutiques and 10 outlet locations. The overall sales gain was achieved despite moves last year to discontinue its coat and SJK moderately priced sportswear lines, and the decision to distribute its Griffith & Gray line only at company-owned boutiques.
According to its e year ended Oct. 31 reached $214.1 million, up 7.8 percent from $198.5 million the prior year. Other categories generating increases were sport, up 26.3 percent to $12.5 million; St. John Home, 36.6 percent to $8.6 million, and St. John Co. Ltd., its Japan subsidiary, 35.8 percent to $6 million.
Declining categories were Griffith & Grey, down 55.1 percent to $2.7 million; jewelry and accessories, 27.3 percent to $6.4 million; fragrances, 30.1 percent to $1.6 million, and coats and SJK sportswear.

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