St. John Knits Warns Earnings Still Falling Short

Upscale clothier St. John Knits warned Tuesday that its earnings will fall short of analysts’ expectations for the second consecutive quarter.

St. John blamed the disappointing numbers on excess inventory at retail boutiques that forced markdowns in the merchandise. The company also said it continued to be plagued by “production labor inefficiencies.”

The company did not elaborate, and executives were not available to comment.

The Irvine company said it expects to report earnings of about 43 cents a share for most recent three-month period, short of the 50 cents a share that analysts had predicted.

A year ago, the company posted earnings of 42 cents a share.

Sales for the third quarter will total approximately $67.7 million, up 24% from $54.8 million a year ago, the company said.

But sales for the retail division, which operates outlet stores and boutiques, will fall $1.3 million below the goal established in St. John’s “aggressive sales plan,” the company said.

The company disclosed the financial projections after the stock market closed. But St. John’s shares fell $1.06 to $26.50 in light trading on the New York Stock Exchange.

In May, the company delivered a similar report for its second fiscal quarter, saying that earnings would fail to meet analysts’ estimates for the first time since it went public in 1993.

It attributed the disappointing second-quarter earnings to a loss of valuable production time that resulted after executives found imperfections in its clothing at retail stores. The flawed merchandise was recalled, requiring the company to divert some employees to work on repairs over a two-month period.

The company’s statement did not explain whether the most recent “inefficiencies” were related to the company’s earlier problems with flawed merchandise.

St. John also said Tuesday that its Amen Wardy Home Division will report a third-quarter loss of about 2 cents a share because of lagging sales and higher than expected expenses.

St. John had expected that division to break even or make a profit in the quarter.

Chief Executive Bob Gray said in the statement that while he is disappointed over the failure to meet analysts’ expectations, he is satisfied with the company’s overall performance for the quarter.

He pointed out that St. John’s projected 24% sales gain would exceed the company’s objective of 18% to 20% growth. Same-store sales, a key measure of industry performance, jumped about 21% in company-operated boutiques, the company said.

St. John manufactures apparel and operates 16 retail boutiques and eight outlet stores.