How I Sold for $130 Million
In the 1980s, Khajak Keledjian and his brother Haro escaped war-ravaged Beirut for the safety of New York City. That's where the two brothers, who both had a knack for retail, scraped together their savings and launched Intermix, a national women's luxury clothing store, in 1993. This month, the Keledjian brothers made headlines when they announced that Gap was acquiring Intermix for a cool $130 million. Khajak, the company's chief creative officer, recently spoke with Inc.'s Issie Lapowsky about how the now 20-year-old company grew from a single store into a fashion empire.
When you're living in the middle of a civil war, it makes you stronger. You become a real survivor. You never know what will come at you the next minute, hour, or day, but you'll do anything to survive.
Growing up, sometimes we'd go on vacation for three weeks and end up staying for a few months, because my father was afraid of the bombs back home. We'd travel to France, London, Greece, Cyprus, and it was difficult being so unstable, but it did give my siblings and me the opportunity to be exposed to many different countries at a young age.
My sister was the first member of the family to come to New York. She got accepted to Columbia, which was a big deal back then. I originally came here just to visit her, but things got so bad back home in 1987 that I kept staying longer and longer, and next thing I know, I'm enrolling in school.
I lived with my brother and sister, who are both older than me, and got an afterschool job working at United Colors of Benetton folding sweaters and cleaning up dressing rooms. We had so many tourists coming into the store everyday, and I spoke so many languages, I felt more natural selling than folding. Before long, I was selling stacks of sweaters to these tourists. I didn't push them to buy, but I knew how much they would love taking them back to their home countries. I understood them. Growing up, I remember wearing Benetton was a big deal. My monthly pay would go to it. If you can relate to your customers, it makes a big difference.
Before long, the managers of a shoe store called Boticelli found out there was a guy selling out Benetton's storeroom, and they asked me to work for them. That's where I got exposed to the buying side of retail. While I was working there, I realized there was a void in the marketplace in terms of having great fashionable clothing with accessible price points. My brother, who was a manager at Barney's, and I used to be designer shoppers, but every time we bought a suit, it would cost $3,000. I understood the emotional connection of luxury products, but I never understood why it had to be $3,000. There wasn't any store with multiple up-and-coming designers in one location at a lower price point. We thought if we could mix young designers and established European brands under one umbrella, pick the best items from each designer, and merchandise it ourselves, it could be big.
We started putting the concept together in 1992, when I was 19. My brother and I had both saved some money, but we had to borrow some, too. We pawned off my mother's jewelry. You name it, we did it. I won't say how much it cost us to start, but lets just say it's not even a fraction of what it costs to open a store today.
We opened the store on a Thursday in 1993, and by that Monday, we had to shut down, because we were out of inventory. The neighborhood had seen our progress as we were building the store, so in a way, we advertised ourselves the whole time. By the time we opened, they were so excited. So we spent that whole first Monday trying to get more inventory. It was a good problem to have.
That store took off. Then, in 1996, a big pipe burst half a block away. We had to shut down the store for two months dealing with rebuilding and insurance issues. While the store was closed, we had customers come in offering us money to help rebuild. We thought, "People must be crazy. What are we giving them that they're willing to pay us to open sooner?" We realized we had something good on our hands.
It was also the first time my brother and I realized we could run the business side of Intermix without physically being in the store. Once we realized we could do that and got back on our feet, we decided to open another store. In 1997, we took the concept to Madison Avenue. Then, after that success, we realized our customers were vacationing in Miami, so we opened a store there. By September 2001, we had six stores and a ton of credibility.
Then September 11th happened, and our business was paralyzed. We were as shocked as everyone else, but because we'd grown up with bombs hitting the bedrooms next to us, I think we were less panicky. Our survivalist instincts kicked in. We also had a strong customer base and supportive vendors who helped us. Still, the question was: how quickly could we get back on our feet?
It took us until about 2004 to begin expanding again. Then, in 2007, we sold a minority stake to an equity firm. We knew that in order to grow the business, we needed more financing. That deal helped us grow from 17 stores to 32 locations today.
Now we're at a point where we really want to take the company to the next level and expand internationally. To do that, we knew we would need not just financing, but a strategic partner. We want to focus on what we're experts at, which is buying and merchandising, not dealing with the legalities and logistics of working in a foreign country. It's hard to be good at everything when you're trying to manage fast growth, and we didn't want to dilute our brand by growing for the hell of it.
So we hired a mergers and acquisitions consultant called The Sage Group to find the best match for us this summer. We didn't waste much time. We met several people, but decided Gap was the best fit for us. They're a global platform, and they really understood our vision. We were very clear about what needs to remain the same and what challenges we face. The goal is not to change Intermix, but to take the best part of Intermix and make it better.
I can't say for sure what's in store for the future. We have a Web business that's growing and brick and mortar stores that could expand in many markets. We're two men in the women's business, so there's no reason we shouldn't be in the men's business. Now, it's just a question of what to do first.