St. John Closes 2 Home Stores, Third to Follow

Just weeks after settling a bitter legal dispute over control of its home store division, St. John Knits Inc. said Monday it is closing three of its struggling Amen Wardy Home Stores.

The upscale women’s clothier will continue to operate home stores--which on Monday were renamed St. John Home--in Costa Mesa and Scottsdale, Ariz., said Roger Ruppert, the Irvine company’s chief financial officer.

The home stores have been at the center of a dispute between the Gray family that heads St. John and home store namesakes Amen Wardy Sr. and Amen Wardy Jr. The younger Wardy was fired last August as chief executive of the home stores unit.

As part of the April 1 legal settlement, St. John agreed to relinquish control of the Las Vegas home store to the Wardys and to rename the remaining stores.

Then, St. John set about closing three of the home stores still under its control. The Dallas store shut down about two weeks ago, the Palm Beach location was shuttered last weekend and the Boston store will close May 23, Ruppert said.

“They have not carried the foot traffic that was desirable to be a strong, profitable venture,” said Peter Buonocore, who was named chief executive of the subsidiary in February.

The closures do not come as a complete surprise. St. John Chief Executive Robert E. Gray said in February that the company would close the Boston store and that it was monitoring the performance of the Dallas and Palm Beach operations.

More St. John Home stores may open later in other locations, Buonocore said.

Other Amen Wardy Home stores also may be set up elsewhere, Wardy Jr. said Monday. And there is “a very good chance,” he added, that one will open in the Orange County area within the next year, which could put the two families in head-to-head competition.

“We’ve been approached by numerous landlords, both around Vegas and around the country, to open other stores,” said Wardy Jr., who now operates the Las Vegas store.

After taking control of that store, Wardy Jr. said he cleared out half of the merchandise and brought in new goods from Amen Wardy Home in Aspen, Colo., the original home store. The Aspen store, which is run by Amen Wardy Sr., was not part of St. John’s home furnishings operation.

“We took over the store and had the three best back-to-back days since the store’s been open,” Wardy Jr. said.

Wardy declined to say why he replaced the merchandise, but the Wardys have complained in the past about the way the stores were managed after Wardy Jr. was fired. At one point, they asked the court to appoint a receiver to handle the stores, saying St. John President Kelly Gray had become the “chief buyer,” a job for which she had “neither the time nor the background.” The court denied that motion.

Wardy Sr. said Monday that the Las Vegas store now looks “the way the Amen Wardy store should look.”

“It didn’t look like Amen Wardy, it looked like St. John,” he said, declining to give specifics. “There’s just a big difference.”

Robert Gray, however, said most of the merchandise in the home stores was chosen by the Wardys.

“We continued doing business with the same vendors,” he said, “And the stores, from the beginning, were stocked by the Wardys.” Even after Wardy Jr. was fired, Gray said, the home stores continued selling products the Wardys had selected.

St. John launched Amen Wardy Home Stores LLC in 1997 in a venture that was 51% owned by St. John and 49% owned by Amen Wardy Direct LLC, a Colorado company owned by the Wardys and Bob Hightower, another investor.

When the stores did not perform up to expectations, Wardy Jr. was fired. He filed a wrongful termination lawsuit against St. John and its executives. St. John countersued.

Wardy maintained in his lawsuit that the home stores were used as a “sacrificial lamb” to benefit St. John. He said the locations for the home stores were chosen without his input.

In every lease, the lawsuit said, St. John used the prospect of the home store providing some kind of economic benefit for St. John, such as more favorable lease rates or increased tenant improvement allowances.

The Dallas location was selected, Wardy alleged, because St. John already operated a boutique there and wanted to expand that store.

Gray denied those claims.

“They helped select each location,” he said Monday. “Amen Wardy Sr. picked Boston. He said that was a great location for him.”

Regarding the future of the South Coast Plaza and Scottsdale stores, Ruppert said it is too soon to say whether they will be profitable because they have been open for less than a year, but the company is optimistic about their prospects.

And Buonocore said St. John Home is looking at possible adjustments to its product line.

“We are going to take a hard look at what we can do different in the stores that will translate into increased sales,” he said. “We are looking at some private label initiatives that we think will be very successful.”

Meanwhile, in a move both symbolic and practical, the wall that separated the home store and the company’s upscale women’s clothing boutique at South Coast Plaza has been torn down. The new St. John Home sign was erected Monday.

Both sides said they are glad to put the dispute behind them. And the Wardys expressed relief over the name change.

“We’re so happy our name is off those stores, I can’t tell you,” Wardy Jr. said.

St. John’s stock closed Friday at $27.56, down 19 cents, in New York Stock Exchange trading.