The designs are selling well but not as much as expected, Moufarrige told Reuters. They were presented at Paris fashion week in October.
"Yes (she's staying on), she has a job to do," he said on the sidelines of the Milan Fashion Global Fashion Summit.
Lohan, the star of "Freaky Friday" and "Herbie Fully Loaded," teamed up with the Paris-based fashion house to give the aging brand a jolt and attract younger customers. Her role as artistic adviser is to feed ideas to chief designer Estrella Archs.
The 23-year-old actress lived up to her reputation as Hollywood's party girl in the collection with super-short pink dresses and blazers worn over bare skin.
She sparked a paparazzi frenzy at the Louvre museum where the show was held, creating exactly the kind of buzz executives at Ungaro had been hoping for.
However, fashion critics were aghast at Lohan's bra tops and stripper-inspired nipple pasties and panned the collection. Rumours have been swirling about her future with Ungaro.
"The criticism was harsh. I am sure we can do better in the collection to be honest but I think it was harsh... But it did sell well," Moufarrige said.
He added that future Ungaro collections needed to be "more tight, more identity driven."
He said Britain's upmarket Harvey Nichols and Harrods as well as New York's Bloomingdales and Japanese stores were among those who had shown interest.
Moufarrige has been open about the marketing boost expected from Lohan. In turn, the actress is trying to rebuild her career after drug problems, stints in rehab and a conviction for cocaine possession and driving under the influence.
"There is more buzz definitely but we are in a recession," he said.
Retired founder Emanuel Ungaro, who stepped down a few years ago also added his voice to the chorus of critics and was quoted by media as saying the collection was a "disaster."
"Mr Ungaro has his views, he can keep them. I have no comment," Moufarrige said.
Lohan's appearance was also a reminder of the risks faced by luxury brands who tie their image to celebrities.
Dior, for example, found itself scrambling to prevent a public relations disaster last year after actress and Dior model Sharon Stone said an earthquake that killed thousands in China could have been "karma."
Moufarrige is known for headline-grabbing staffing decisions. As president of Chloe, he replaced Karl Lagerfeld with the then 25-year-old Stella McCartney, daughter of the Beatles star, Paul McCartney.
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