West Germans Buy 80% of Irvine-Based St. John Knitwear

IRVINE —  Escada, an international fashion designer and manufacturer, has bought 80% of St. John Knits, a maker of expensive, knit dresses and suits.

The acquisition, completed recently for an undisclosed cash sum, will enable the family-owned St. John to develop its own chain of boutiques, Bob Gray, chairman and chief executive of St. John, said Friday.

“Everybody has to get bigger--particularly in the garment field--and retailers are getting weaker,” said Gray, who along with his wife, Marie, launched St. John 27 years ago. With the rash of mergers and closings among major and specialty retailers, Gray said, St. John “could have a problem with our distribution in the future.”

Gray said he expects St. John boutiques to grow from a single location in Palm Desert to 20 to 30 stores within three years. Much of the new store development will be in Europe and the Pacific Rim--notably Hong Kong, Singapore, Seoul and Hawaii--where St. John has virtually no outlets now, Gray said.

Gray and his wife, who is head designer, both have three-year contracts and will remain at St. John, as will the rest of the management team. In addition, Bob Gray will join Escada’s board and Escada’s chief executive, Wolfgang Ley, will join St. John’s board.

The purchase is the first American acquisition for 13-year-old Escada AG, a Munich-based maker of ready-to-wear designer sportswear and accessories for women. Escada, which is publicly traded in Germany, had sales of $361 million for the fiscal year ended Oct. 31--more than six times those of St. John Knits.

St. John began as a knit-contractor in the early ‘60s, after Yugoslavian-born Marie Gray spent $450 on a knitting machine and persuaded her future husband that selling her knits would finance their honeymoon. They launched the company in the San Fernando Valley garage of Bob Gray’s mother. Today, St. John employs 1,200 people and does all of its spinning, twisting, yarn dyeing and garment construction at six California factories.

The manufacturer is known for its sleek, padded-shoulder dresses and jumpsuits, as well as two- and three-piece, classically styled knitwear. St. John produces under the St. John and Marie Gray Sportswear labels, with prices ranging from $400 to $1,000.

Sales for the firm reached $55 million for fiscal 1989 ended Oct. 31, up 27.9% from the prior year.

St. John is Escada’s third purchase since 1987, when the German firm acquired majority interests in two West German women’s apparel firms.

With 17 stores in the United States, Escada gives St. John the benefit of its marketing skill as well as the German company’s expertise in identifying potential markets, said Lawrence C. DeParis, vice president of finance with Escada (USA) Inc., the American subsidiary in New York. “St. John without question will run very autonomously,” DeParis said. But Escada “perhaps can help St. John with potential new lines or other expansion possibilities.”

Escada produces three lines--Escada, Laurel and Crisca--with Escada making up more than half of Escada AG’s total volume for fiscal 1989. The firm’s merchandise can be found in the United States at such upscale stores as Saks Fifth Avenue and Neiman Marcus as well as its retail stores, none of which are on the West Coast.

While no definite plans have been developed for new products, Gray suggested that a few years down the line, St. John could broaden its menswear line which now includes only men’s sweaters, sleeveless vests and pullovers.