St. John Knits Inc. said it fired Amen Wardy Jr., chief executive of the four-store Amen Wardy home-furnishings chain, which has lost money since it opened about a year ago.
Wardy, the son of a well-known Southern California designer, was succeeded by David Frankel, an executive vice president at Irvine-based St. John as of Aug. 31, according to a Securities and Exchange Commission filing.
St. John owns 51% of the Amen Wardy chain.
Frankel will move to cut costs, raise sales and boost margins at the chain. St. John, which invested in the chain in August 1997, expected the chain to be profitable, but its small size has not generated enough sales to offset administrative costs, Chief Financial Officer Roger Ruppert said on Wednesday.
"The revenue base from four stores is too small," Ruppert said.
Ruppert said he expects the Amen Wardy chain to report a loss for the fiscal fourth quarter, which ends Nov. 1, a profit in the fiscal first quarter and to break even in fiscal 1999, which ends Oct. 30, 1999.
The Wardy chain sells gifts and home furnishings, including custom-made and antique furnishings.
On Aug. 25, upscale women's clothier St. John Knits said its fiscal third-quarter earnings would be about 43 cents a share, less than the 50 cents analysts expected for the quarter ending July 31.
Retail sales at St. John, which also operates 16 retail boutiques and nine outlet stores, were $1.3 million lower than expected. The Amen Wardy stores accounted for about 2 cents a share of the shortfall, and the chain will trim another 2 cents from fiscal fourth-quarter earnings as well, Ruppert said.
St. John's institutional investors aren't pleased with the Wardy investment, which they see too far afield from St. John's women's clothing and accessories business, Ruppert said.
St. John invested in the Amen Wardy business because it shares a similarly wealthy clientele and because it will be able to manufacture some of the things the Wardy stores sell, said Ruppert. For instance, St. John could make flatware at its new costume jewelry factory in Mexico as well as sewn products such as pillows, Ruppert said.
The company expects to open two more Wardy stores in the next year, which should help to offset costs, he said.
St. John now has Wardy stores in Boston, Dallas, Las Vegas and Palm Beach, Fla.