St. John Knits Stock Falls as New President Is Announced

St. John Knits Inc.’s stock fell $5 to $61.75 Tuesday, one day after co-founder Robert Gray announced that his daughter, Kelly, is being promoted to president of the women’s clothing and accessories company.

St. John executives declined to speculate what caused the 7.5% drop during trading on the New York Stock Exchange. The company’s shares fell as much as $5.25 before rebounding slightly toward the end of the trading day.

“Our business is making dresses, not speculating on the stock’s movement,” said Roger G. Ruppert, St. John’s chief financial officer. “It did catch a lot of people, including management, by surprise. But other than the president leaving, our fundamentals haven’t changed a bit.”

One clothing industry analyst tied the drop to investor concerns that Kelly Gray, 29, might not be ready to assume operational duties now covered by Robert C. Davis, who will retire in a month. Kelly Gray most recently served as an executive vice president and creative director.

“Undoubtedly, the speculation is that she’s the founder’s daughter so she naturally can’t be as good as a seasoned industry executive,” one clothing industry analyst said. “But, in this case, I think the kid is going to surprise a lot of people. . . . She’s been heavily involved in the guts of the company for a long time and has been doing a better job than most people really know.”

Ruppert said the upcoming transition is expected to go smoothly because Davis will remain with the company for a month and subsequently be available on a consulting basis. “Nothing is changing as far as what the company is doing,” Ruppert said. “Yes, it’s a fundamental change when the president leaves, but that’s all that’s changing.”