FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

St. John Knits, Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SJK)") else Response.Write("(NYSE: SJK)") end if %>
P.O. Box 19524
Irvine, CA 92713-9524
(714) 663-1171

UNION CITY, Ca., December 22, 1996/FOOLWIRE/ --- St. John Knits released their fourth quarter and fiscal year end results on December 19th. They were pleased to announce that they have been able to achieve record sales and earnings for the fourth quarter and for the year.

The company reported net income of $8.6 million or $0.50 per share for the fourth quarter versus $6.2 million or $0.38 per share last year, an increase of 40%. Net sales for the quarter increased 27.6% to $61.1 million. Their retail division reported sales of $14.6 million, an increase of $3.3 million or 28.8%.

MARGINS. Gross profit margins for the fourth quarter were 57.9% versus 55.7% last year. A combination of things are driving the margin improvement. They are improving their efficiency. They are looking for 53-54% margins in the coming year and the addition of the paillette (a heat-set product they apply to their knitted garments used as a trim or all-over decoration) manufacturing facility is going to help improve margins dramatically. SG&A as a percent of net sales was 33.6% versus 34% last year.

YEAR END RESULTS. For the year, the company reported net income of $27.1 million or $1.59 per share versus $19.6 million or $1.19 per share last year, an increase of 38.7%. Net sales for the 12 month period increased 25.4% to $203 million. Their retail division reported sales of $51.3 million, an increase of 32.2%. Gross profit margins for the 12-month period were 56.2% versus 54.1% last year. SG&A as a percent of net sales was unchanged at 33.7%.

SAME STORE SALES. Same store sales for the quarter were 13.2% and for the year were 10.9%. November comps were much stronger and November sales overall were up 24-25% over last year. It appears St. John is enjoying a very strong Christmas season, not only in their own stores but in their major accounts.

BALANCE SHEET. Cash and short term investments at fiscal year end were $10.4 million versus $15.1 million at the end of last year. The current balance is about $21 million. Accounts receivable balance at fiscal year end was $28.1 million, up $7 million from the $21.1 million reported last year.

INVENTORY. Inventories were $23.6 million, an increase of $8.7 million or 58.4% over last year. This increase is primarily due to the following factors: an increase in sales which were up 25%, an increase in the knits work in process inventory where they are trying to get a jump on the future season which kicks in on November 1st, the addition of the Beverly Hills boutique and an increase in inventory at the New York boutique due to the expansion, and an overall increase in inventory levels at their retail stores because they are trying to increase levels for sport, G&G and shoes. There was an increase in sport inventory of about $1 million. Sport was introduced this year, so last fiscal year end there was no sport inventory. There was also the purchase of approximately $800,000 of raw material inventory in connection with the recent purchase of equipment for the manufacture of sequins which they previously discussed. People should expect higher inventories than they have normally seen at St. John. They are doing a much better job of shipping. They have the inventories they would like to have and are doing that because they are able to produce enough goods, stockpile it in their shipping department and then ship it in bulk and in large groups to the stores. That necessarily increases their inventory levels.

OTHER PRODUCTS. Shoes have been brought in-house. They are just completing the Spring season, doing the shipping for the shoes that were sold. The reaction to the new shoe line, the one that was created more in house without any outside influence, has been outstanding. They are very excited about the shoes and think they show great potential. Accessory sales were $8.6 million and fragrance was $2.4 million. In accessories, they will be happy with 20% growth. For fragrance they would hope to have a little stronger growth.

LIQUIDITY. Looking at liquidity, no amounts were outstanding under the line of credit. They are in the process of amending their line of credit. The amendment should be signed within the next week. Under the amended line, the amount will be increased to $25 million from the current $15 million. The unused $8 million facility revolver will be cancelled. The amended line will expire on March 1, 1999. The company has $49.5 million in working capital at year end.

CAPITAL EXPENDITURES. During fiscal 1996, the company purchased property and equipment of approximately $21 million, the primary components being the purchase of land and construction costs to build a new design center and production facility located on Armstrong Avenue in Irvine. Although they are currently operating out of the facility, the move will be 100% complete by the end of February. The company purchased 32 electronic knitting machines. They incurred construction costs in connection with the opening of the Beverly Hills and New York boutiques. They also purchased land and made leasehold improvements for a new Van Nuys production facility. Their capital expenditure budget for fiscal 1997 is estimated to be approximately $17 million. They have two more satellite factories on tap for next year and that is where they see their expenditures of excess capital going, at least for 1997. Certainly, if they came across an acquisition, they are in a position to take advantage of it.

DIVIDEND. On December 18th, the board of directors declared a regular cash dividend of $0.025 per share to be paid on February 14th to shareholders of record on January 14th.

RETAIL SALES. Their retail sales were ahead for the fourth quarter 19% and 20.5% ahead for the year. They put Marie Gray on the road the latter part of the year doing trunk shows. She covered Honolulu, Westchester, Washington DC, Minneapolis, Ft. Lauderdale, Munich, and Frankfurt. All of the shows were a great success with huge turnouts of loyal St. John collectors.

INTERNATIONAL SALES. International sales are very strong and it is one of their strongest areas of growth in both Europe and Asia and they expect that to continue. They have a very strong division now dedicated just to international sales. International sales totalled $13.4 million or roughly 6.5% of the total.

EXPANSION PLANS. In terms of expansion, they are looking at 20% growth in retail square footage. They have plans already in the works for Dallas. They are negotiating to find additional space in Las Vegas and hope to pick up at least 4,000 square feet there. Right now the square footage they are looking at adding are all remodels. They are looking for locations to open new boutiques, but don't have any plans yet.

GRIFFITH & GRAY. Kelly Gray accepted the Cadillac Designer of the Year award for American Designers on behalf of Griffith & Gray at an event in Chicago which introduced the new Cadillac Catera. While the number of doors for Griffith & Gray has been reduced in total, the business at existing doors has increased dramatically. They do expect to increase the number of doors in the coming year and, again, by a substantial number. In fact, they hope to double the number of doors in the next year. Griffith & Gray is still primarily being produced in Italy and will probably stay there most of next year but they are gradually, in view of the success they are having with the Sport line being done in house, they will probably try to bring Griffith & Gray in house long term also. Revenues from Griffiths & Gray totalled approximately $3 million this year and they think next year they will double that comfortably and maybe will do even better than that.

MANUFACTURING & DESIGN FACILITIES. They have now completed the transition of manufacturing Sport from Europe to an in-house operation in Irvine California. With the improvement in the quality, the sell-throughs at the retail level have improved dramatically. They will complete their new design facility at the end of January. They don't know if it will improve the design of the product or not, but their design staff will definitely be happier and more comfortable and it will greatly expand their R&D capabilities.

1997 is their 35th anniversary year and they plan extensive promotions to celebrate 35 years of excellence.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. Note: Statements made by a company other than historical information may constitute forward-looking statements for which the company can claim protection under the Safe Harbor Act. Please consult the company's filings with the SEC for information on risk factors which might cause actual results to differ materially from the information contained in these forward-looking statements.