According to sources, Karkut has become the latest in a long line of senior executives who have failed in their attempts to fit into a corporate culture that is dominated by chief executive, co-founder and majority shareholder Josephine Chaus.
Calls to Chaus, Karkut and to Nicholas DiPaolo, vice chairman and chief operating officer, weren’t returned Thursday, but sources familiar with the situation said that Karkut left the firm late last week.
With a background principally in men’s wear, Karkut’s selection as president of the better women’s apparel firm in November 1999 was considered something of a surprise. DiPaolo, the former head of Salant Corp. who joined Chaus this September, also has a men’s wear background. However, unlike Karkut, a sales and marketing specialist, DiPaolo is an administration and operations expert.
As reported, at the time of DiPaolo’s appointment, finance vice president Bart Heminover said that Karkut “is concentrating on more of the top-line growth, opening new doors.” Karkut reported to Chaus, as DiPaolo does.
Karkut was senior vice president of the Tommy Jeans division of Tommy Hilfiger when she joined Chaus. Prior to that, she was vice president of sales and marketing for Chaps by Ralph Lauren; vice president of sales for Ralph Lauren’s men’s sportswear and head of men’s sales at Liz Claiborne. She began her career as a buyer at the Chess King division of Melville Corp., which was later acquired by the now-defunct Merry-Go-Round Enterprises.
Top-line growth has been a problem for Chaus which, for the year ended June 30, saw sales slip 3.4 percent to $181.5 million as it sought to reposition its brands to focus on better from moderate apparel. Profits nearly vanished, falling 98.2 percent to $192,000. The situation worsened in the first quarter as the company reported a $936,000 loss against net income of $4.3 million and a sales decline of 23.6 percent, to $40.7 million.
The revolving door of high-level executive talent at Chaus has been an expensive one for the company.
Andrew Grossman, former president of Jones Apparel, joined Chaus as its ceo in 1994. Upon the termination of his position two years ago, Chaus was obligated to pay salary and bonus provisions running through the term of his contract this past September. Although the company sought to end those payments, an arbitration panel this summer ruled in Grossman’s favor. His annual base salary was $1 million and he received bonuses equivalent to 2.5 percent of Chaus’s yearly earnings. Additionally, he received a $6.2 million cash signing bonus upon joining the firm six years ago.
Karkut received a more modest signing bonus — $250,000 — in addition to a base salary of $900,000 for her first year of service and $1 million for the following two. In addition to a bonus of 2.5 percent of net income in the event that preestablished goals were met — not expected to be realized based on Chaus’s recent dismal performance — she received options to acquire 675,000 shares at an exercise price of $2.50 each, vesting over four years, and 100,000 shares of restricted stock.
Chaus said in its end-of-the-year proxy statement that DiPaolo would receive a below-market salary in lieu of stock option grants, vesting over the course of three years, exercisable at the market price on the day of the grant. Once vested, he stands to own between 10 and 12 percent of the company’s outstanding shares.
Grossman’s departure, reported exactly two years ago today, was a stunning development because he appeared to be putting the company back on solid footing. Chaus had failed to make a profit since 1992 when it earned $4.3 million in fiscal 1998 and more than twice that, $10.8 million, the following year. Sales reached a plateau of $181.7 million in fiscal 1995 and then peaked at $191.5 million in 1998. The October 1998 loss of the Nautica women’s wear license — expected to boost top- and bottom-line growth but ultimately a lift to neither — was a turning point in what briefly had appeared to be a valiant turnaround tale of a company that had repositioned itself following the death of its popular founder and namesake, Bernard Chaus.
Because its shares had failed to maintain the required $1 per share selling price, Chaus was delisted by the New York Stock Exchange in October. Its shares now are traded on the over-the-counter bulletin board system where they closed at 31 cents, up 4 cents, on Thursday.