Lew Frankfort, the heralded, longtime chairman and chief executive officer of Coach Inc., is handing the reins over to Luis, president of the brand’s international group, in January. Frankfort, the mastermind behind Coach’s success, will then transition to executive chairman, an advisory role that will focus on brand strategy.
Before he takes over as ceo, Luis will serve as president and chief commercial officer, a role he was appointed to on Thursday, and he will remain in that post for the duration of the year. He also joined the board. In the new job, Luis will be responsible for all business units, merchandising, licensing, corporate strategy and consumer insights. Chief operating officer Jerry Stritzke and president and executive creative director Reed Krakoff will report to Frankfort until 2014. After January, they will then report to Luis.
“This is an exciting day for Coach,” Frankfort told WWD. “It’s a result of a several-year succession process, which has led us to Victor Luis. I couldn’t be happier with the appointment. I’m looking forward to being tied at the hip with Victor during this transition process.”
The change in top management comes at a critical time for Coach, which has embarked on an ambitious program of transitioning into a full lifestyle brand anchored in accessories. This will include a revamp of its stores, as well as the introduction of more women’s and men’s apparel and footwear. The new strategy comes as Coach faces increased competition from the likes of Michael Kors Holdings Ltd. and Tory Burch.
Following the news of the management change, Coach shares slid 1.2 percent to $48.20 on Thursday.
Frankfort, 66, has been at Coach for exactly half his life. The retail veteran started at the brand in 1979 as the vice president of new business development. In 1985, Sara Lee Corp. acquired Coach for $30 million. That year, Coach’s sales were $19 million and Frankfort took over as president. Ten years later, in 1995, Frankfort was named chairman and ceo. Sales topped $500 million a year later, and in 2000, Coach went public through an IPO, raising $118 million at $16 a share. For fiscal 2001, Coach’s sales reached $616.1 million. Rapid expansion both domestically and internationally followed suit, as did the establishment of a men’s business; Poppy, a contemporary youthful accessories brand, and Reed Krakoff’s luxe sportwear line. Although Coach was founded in 1941, Frankfort is credited for building the brand to what it is today, a $4.76 billion company. He recently was named by the Harvard Business Review as one of the 100 best ceo’s in the world, coming in at number 21.
“Coach is in my blood. It’s a second family,” Frankfort offered.
Naturally, letting go of the top spot won’t be easy for the ceo, who said that the search for his successor has been ongoing since 2008.
“I identified Victor early as someone who could potentially succeed me,” Frankfort said. “He started as president and ceo of Coach Japan in 2006. He added responsibility for Coach China in 2008 and became president for Coach retail international in March 2010. We provided broader opportunities for Victor here and he’s been reporting directly to me.”
Luis, 46, brings a wealth of international experience, having headed up business strategy in Asia, which is a locus of growth for Coach. Appointed president of international last February, Luis oversaw all of Coach’s business outside North America. This broad experience is key to the next phase of Coach’s business strategy of becoming a global lifestyle player.
“It really is now about ensuring that we can execute to perfection this vision that Lew has,” Luis said, in regard to what he hopes to accomplish as ceo. “Lew, myself and the senior leadership team are very aware of the environment we are competing in.”
The New York-based brand registered weaker-than-expected second-quarter earnings in January and turned in its first negative quarterly comparable-store sales figure since the recession hit.
At the time, Frankfort acknowledged that the marketplace has “shifted,” while referring to the 2 percent decline in comps in North America. This marked only the third time in 11 years that Coach registered a negative comp. It recorded negative comps in the second quarter of 2002, following 9/11, and in January 2009, following the financial collapse. Income for the period rose 1.5 percent to $352.8 million, or $1.23 a diluted share on sales of $1.5 billion, which constituted a 3.8 percent increase.
By holiday 2013, Coach hopes to have a transformed concept replete with seasonal capsule collections created by Krakoff. Those collections will not only inform the direction of the merchandise for the quarter, but they will also elevate the brand’s pricing structure somewhat. Moreover, the new direction will be reflected in the look of Coach stores, which will be merchandised by Krakoff.
Like Frankfort, Krakoff, who joined Coach in 1996, has been credited for building the brand by streamlining and, in some ways, reinventing Coach’s signature bags such as the classic duffel. While Luis’ new role will eventually put Krakoff reporting directly to him, the creative director praised the decision.
“Coach has made an excellent choice in Victor Luis. He embodies a combination of management discipline with an appreciation of how we create our product and evolve our brand [and] that is at the heart of Coach’s success,” Krakoff said. “I look forward to our continued partnership.”
While Luis will work to make further inroads in the matured North American market by focusing on upping Coach’s footwear offering, among other things, he will have the opportunity to focus on Asia and the men’s business.
In China, Coach is on track to generate at least $400 million in sales this year, while the men’s division is on course to earn sales of more than $600 million globally in fiscal 2013, up 50 percent from last year.
Luis has spearheaded the important growth of the men’s business in Asia, where men typically own a variety of handbags. He has also played a role in developing men’s into a more “holistic” concept, which is, in some respects, closer to the lifestyle ideal that management is striving toward for Coach overall.
“I think we have an amazing history of having tremendous success in establishing the accessible luxury space,” Luis said, noting that next year, he looks forward to working with Frankfort in his new role.
“Lew will always be a part of Coach,” he noted. “When you have in essence the founder of the company, he never leaves. Very few people have impacted an industry in North America like Lew has.”
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