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) 863-1171

UNION CITY, CA (April 7, 1997)/FOOLWIRE/ --- St. John Knits released first quarter 1997 results in early March. The company reported net income of $7.4 million or $0.43 per share for the first quarter versus $5.7 million or $0.35 per share last year, an increase of 30%. Net income in the first quarter of fiscal 1996 was increased by $183,000 or $0.01 per share due to a worker's compensation insurance refund. Net income from recurring operations increased 34% or $0.09 per share if you adjusted for this one-time refund.

SALES RESULTS. Net sales for the quarter increased 24% to $56.2 million. The retail division reported sales of $16.4 million, an increase of $3.1 million or 23%. Same store sales for the quarter were up 10.6%. Sales per square foot for all retail, full-price retail, was about $865 per square foot on an annualized basis versus $800 in 1996.

MARGINS. Gross profit margins were 56.5% versus 54.3% last year. They think those margins will hold, if not improve further, going forward as they improve efficiencies, reduce costs such as rent by moving to company-owned facilities, and increase sales.

SELLING, GENERAL & ADMINISTRATIVE EXPENSES. SG&A as a percent of net sales increased 70 basis points to 34.6%. They think for the year SG&A will come down to close to 33% and a few basis points over. The increase in SG&A was partly attributable to the opening of the New York boutique in November. The ramp for the expansion of New York is almost $1 million per year, that's for the additional piece. When you add that kind of capacity and pay that much more rent, you can't double sales at the same time you are doubling the rent so that is a drain on SG&A. About 3-4 months ago Mr. Gray took a position, in the past they have not really defended the St. John line. They have trademarks, it's registered throughout the world. But if somebody came along and was going to sell, for example, bed linens under the St. John name, they did not actively go after them to prevent it. That policy has changed somewhat and as a result in the fourth quarter last year and the first quarter this year they started building a war chest to actively go after people who are using the St. John name in areas where they want to protect it. They haven't spent all that money yet, but they are building it up and there are some target people they are going after. Also, in March of last year they leased a new airplane which is larger and, as a result, the lease expense per year which hits in the first quarter is quite a bit higher and the operating cost of that airplane is also higher. At the end of the fiscal year they formed a foundation called the St. John foundation which will be a charitable foundation. The first quarter is the first quarter they've made a contribution to that foundation.

CASH AND ACCOUNTS RECEIVABLE. Cash balance at February 2, 1997 was $24 million versus $10 million at year end. Current cash balance is about $15 million. The accounts receivable balance at the end of the first quarter decreased to $19.8 million from the $28.1 million at year end. The accounts receivable balance at the end of the first quarter last year was $14.3 million.

INVENTORIES. Inventories were $21.7 million, a decrease of $1.9 million since year end. The inventory balance at the end of the first quarter last year was $14.1 million. The increase in inventory of $7.6 million or approximately 54% was primarily due to the following factors: increased sales which were up over 24%; higher inventory levels because of the addition of the Beverly Hills boutique and the expansion of the New York boutique; the addition of raw material inventory used in the production of paillettes which was brought in house in October 1996; the additional shoe inventory they picked up when they took over the wholesale distribution of the St. John shoe line which started in November; the higher level of Sport inventory needed to support a growing operation, the line was first introduced in November of 1996; and finally an increase in the inventory levels of G&G, Sport, small leather goods, and shoes carried in their own retail stores which previously were not carried in all of their company-owned stores. The growth of inventory will begin to taper off in the next quarter and probably will slow down and could even go in reverse because they are now in a position where they are shipping stores packages and they are able to accumulate. The inventory figures we are getting now relates to their accumulation of merchandise to ship to the stores so that they can ship what they consider complete packages. That is something they have strived for for many years and have finally reached that stage.

LIQUIDITY. Looking at liquidity, no amounts are outstanding under their $25 million line of credit. The company had $52.6 million in working capital at the end of the quarter. The company purchased property and equipment of approximately $6.5 million during the quarter. The primary components of this were: construction costs incurred in connection with the new 130,000 square foot design center and production facility located on Armstrong Avenue in Irvine; relocation was completed during the first quarter and the facility is now 100% operational; the purchase of 6 additional electronic knitting machines, bringing the total to 173 machines at the end of the first quarter; construction costs incurred in connection with the new 28,000 square foot production facility in Van Nuys, California; production was moved from a leased facility in San Fernando to the company-owned facility during the first quarter.

CAPITAL EXPENDITURES. Their capital expenditure budget for the remainder of fiscal 1997 is approximately $10 million. The primary components will be: continuation of a program to upgrade computer systems; construction costs to be incurred in connection with the relocation of the Dallas boutique to a larger space resulting in a net increase of about 2500 square feet; construction of a new 27,000 square foot production facility in San Ysidro, California; relocation from a leased facility in San Ysidro to the new company-owned facility is planned to occur this Summer; costs to be incurred to expand their yarn twisting and dying capacity; and finally, the purchase of additional electronic knitting machines.

DIVIDEND. On February 28th the board of directors declared a regular cash dividend of $0.025 per share paid on April 25th to shareholders of record on March 26th.

RETAIL BOOKINGS FOR FALL. Retail sales for the first quarter ran 19% ahead of last year and their February sales trend is in the mid-to-high 20s. They are in the midst of their Fall market and will have all of their ready-to-wear orders in-house by the end of March. The backlog on the Fall orders for shipping May through October is 23% ahead of the same time period last year. They are sure this number will go up but this is not something they have worried about in recent years because they have always been sold out. If they look at the orders they have in-house and their projections of basics, special orders, and shows, they are basically sold out again. This year they are in hopes to be able to do some reorder business. Reorders are the most profitable business they do and they are the most profitable for the stores so they would hope that by the middle of the Fall season they are able to take care of a few reorders. They are receiving an excellent response from their customers. St. John is performing for them and they have increased their purchases. The retailers continue to be excellent partners and target St. John for growth. All the major stores have new and exciting programs on the horizon for the upcoming season.

INTERNATIONAL. St. John's international director of sales has just returned from the Europe and Asia markets and anticipates a 25-30% increase in those orders. In the UK they have made an entry through the House of Frasier stores. The UK can be a very strong market and the House of Frasier in their Dickens & Jones division is doing extremely well with the product. They have a very large display in St. John's own department and are very excited about the product. St. John is also looking to open their own boutique there, but have not been able to find a location they feel is affordable as yet. They will continue looking until they find something.

PROJECTIONS FOR GRIFFITH & GRAY AND SPORT. They are anticipating volume of around $7 million for Griffith & Gray and about $14 million for Sport. The Griffith & Gray line is coming back. They had some fit problems and think they have cured those now. They have been fumbling along trying to find their way with regard to design and these last two lines appear to be on track and they have had some very promising sell-throughs and Neiman Marcus is increasing the number of doors they are putting the line in, so they think it is on the right track now. The coat line is very profitable. They are projecting about $4.5 million for the coat line this year.

FRAGRANCE PROJECTIONS. They are looking for 10% growth for the year for their fragrance and will introduce a new fragrance sometime later this year. They will keep their locations, but it is not something that they are planning to put major promotional effort into.

EVENING COUTURE AND EVENING PROJECTIONS. They don't have all the orders in for the Evening Couture line yet, but they targeted a couple of the stores for a really terrific new evening program and that is something where they are separating out the evening and making it its own area. Evening is becoming its own department in several of the stores. Evening is in all 476 doors that the knits are in, but as far as the Couture Evening they don't have the final number of doors yet.

SHOES. This is a transition year for them regarding shoes. They don't expect to lose money in the division but they think where they really expect it to be additive to earnings is next year. They would like to see shoes do $4-4.5 million this year. They will probably get into Sport shoes, but not in depth. Unfortunately, the shoe factory they have is a very fine quality shoe factory and they are not competitive in producing sport-type shoes. Dressy shoes are where they expect to shine and where they expect to do the best in the shoe field.

ACCESSORIES. Their goals for accessories growth is around 17%. They have completed an agreement with Marine Optical as far as eyewear and hope to launch that the latter part of 1997 and they are in the final stages of negotiation with Swiss Army brands for a watch license agreement and watch lead times are much longer so that will probably be mid-to-end of 1998.

RAW MATERIALS. As far as their Australian wool, they have just locked in a new contract that they think takes them a little bit over a year at approximately the same price, maybe a dime per pound less than they have been paying. As long as they can buy wool at the price they are paying now, that is fine. They won't get burned and they won't try to make money on the wool, they will just try to price the garments the same based on raw materials. So, they are very comfortable with wool prices right now.

TRUNK SHOWS AND SPECIAL APPEARANCES. Marie Gray is currently in Florida doing a week of personal appearances for major charity groups at Mira Lago and the Boca Raton Beach Club. The St. John collection is featured in Beverly Hills in the Wilshire Boulevard windows for a trunk showing there and the Sport collection is featured in all the windows at Saks Fifth Avenue on 49th Street and on March 12th the Sport windows will be joined by the St. John knit collection in the Fifth Avenue windows for a trunk showing and to salute the arrival of the new Spring deliveries.

NEW FACILITY. Overall things are going extremely well at St. John. Design has moved into their new facility which is truly awesome. For the first time they will have an abundance of space and the opportunity to utilize the advanced technologies that are available to them. They have moved into their new Van Nuys factory of 27,000 square feet and start construction on their new San Ysidro factory which they should occupy in August.

RETAIL EXPANSION PLANS. They have moved into their expanded space in New York of 13,000 square feet and plan to move into their new Dallas boutique of 4000 square feet in August. Going forward they will revisit their smaller stores and see what they can do there. They have a few stores that are right at 2000 square feet. With their expanded product structure, it appears that 3500 square feet is the minimum space they need to house all of the St. John products in a boutique, so those smaller stores are just not adequate. There are currently 7 or 8 stores less than 3500 square feet in size. They will either take those stores and get expanded locations or they think they will experiment with taking either Griffith & Gray or Sport into separate locations sometime this year. They have a couple of spots in mind. Long-range that is going to be their objective, because they think they can support more Sports stores than they can St. John stores. They are opening a new door that does not carry St. John with St. John Sport. They plan for 1997 to continue their policy of investing in building, equipment, and people. They are also still looking for sites in the Portland/Seattle area and the Newport Beach area for new St. John stores.

ACQUISITIONS. They are open to acquisitions and have looked at a couple of possibilities, but they have nothing right now that represents more than a 50% chance of a deal being made. They have been looking, but the quality just isn't there and they remain very selective about any possible acquisitions.

* 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.