It’s the status quo after all for John Idol and Capri Holdings Ltd.
In a surprise about-face, the parent to Michael Kors, Versace and Jimmy Choo said Monday Idol would stay on as chief executive officer while his chosen successor, Joshua Schulman, would leave the company.
Schulman is walking out with a payout totaling more than $8 million and a six-month non-compete, putting the widely respected fashion veteran back on the market in September, when he was meant to take charge at Capri.
The change upends what Idol described last year as a “thoughtfully planned leadership succession” that saw Schulman become brand CEO at Michael Kors in August, a position he was meant to hold for just over a year before taking over the corner office.
But some time in the last month or so, that plan seems to have fallen apart.
Schulman complimented the team at Kors, said he was going to share “my vision for the future direction of Michael Kors” at an upcoming investor day. He also spoke glowingly about the broader company.
“I am impressed with the incredible portfolio of luxury houses, each with their own rich heritage, exclusive DNA, and strong consumer loyalty,” Schulman said. “Capri is unique, with three brands led by the design visions of Donatella Versace, Sandra Choi and Michael Kors. Each of these original founders are iconic figures and have powerful voices to communicate with their fans. I am confident in the strong growth potential for Capri Holdings and look forward to partnering with John and the board in the future to lead the company through our next chapter of growth.”
Now that next chapter will, again, be written by Idol, 63, who has been CEO of the company for 19 years and ranks as one of the longest-serving top executives in fashion.
Capri bears Idol’s stamp prominently. It was Idol who led the company through its blockbuster initial public offering in 2011. He then started adding top-tier luxury brands (Jimmy Choo in 2017 and Versace in 2018) to build a portfolio. And during the last two years, he successfully navigated the group through the worst days of the pandemic.
Idol will continue as chairman, where he was meant to become executive chairman when Schulman took the CEO reins.
The switch shocked industry insiders and Wall Street, where investors sent shares of the company down 15.2 percent to $46.25. That drop came on a bad day for Wall Street, where fears over Russia’s continuing invasion of Ukraine sent the Dow Jones Industrial Average down 797.42 points, or 2.4 percent, to 32,817.38.
In a statement Monday, Idol reasserted his control over the business and its direction, emphasizing that the strategic plan set before the pandemic remains the company’s north star.
“At Capri Holdings, we are executing against our clear strategic vision for growing our three powerful fashion luxury brands and seeing strong results,” Idol said. “We remain well-positioned to achieve meaningful long-term revenue and earnings growth as well as deliver increased value for our shareholders. I am fully committed to continuing to lead Capri Holdings and driving our future success.
“Michael Kors has a talented management team in place that will continue to execute on its strategic initiatives,” Idol said. “The strategies that we put in place prior to the pandemic have been generating strong consumer demand and driving higher profitability as we continue to elevate brand positioning. The board and I remain extremely optimistic about the future growth of Michael Kors and Capri Holdings. We are grateful to Josh for his contributions to our organization.”
Oliver Chen, an analyst at Cowen, described Schulman’s departure as “surprising” and said he was “a strong leader across strategy and merchandising.”
“Mr. Schulman was an important part of our investment thesis on Capri given his deep experience in luxury and at the Coach brand,” Chen said. “However, we believe the existing management is agile, seasoned and has a solid playbook to continue the momentum in the Michael Kors business. Unfortunately, the succession plan did not work out as planned. In our view, key priorities include innovating signature logo product, optimizing marketing strategies, and we believe the brand should intensify collaborations and partnerships. Mr. Idol’s signature strength is speed, agility and merchandise execution.”
While it is not clear just what caused the company to switch its plans, Schulman is being paid very well as he leaves and negotiated a shorter non-compete agreement, with just six months on the sidelines for himself.
That’s a change from the year and a half he waited after his departure from Coach was announced in March 2020, amid a changing of the guards at parent company Tapestry that saw Jide Zeitlin take the top spot from the ousted Victor Luis. (However, within the year, Tapestry had made another move and tapped Joanne Crevoiserat as CEO after Zeitlin is was forced to resign following sexual harassment allegations from his past).
But if one either wins or dies in the “Game of Thrones,” the corporate version has top executives winning and getting either big jobs or often walking away with big payouts and a chance to play again.
Under his separation agreement from Capri, Schulman will receive a package that is consistent with what his contract specifies for being terminated without cause and includes:
• Continuing payment of his annual base salary of $1.3 million for two years, totaling $2.6 million.
• Two years’ worth of his target annual cash incentive, totaling another $5.2 million.
• A bonus of at least $700,000 for his work thus far.
• And his restricted share units with a vesting date within 12 months will continue to vest.
“The separation agreement contains mutual nondisparagement provisions and requires that Mr. Schulman comply with confidentiality and nonsolicitation restrictive covenants,” the company said in a filing with the Securities and Exchange Commission.
Schulman’s situation is unusual, but not without precedent, particularly when it comes to taking the reins from a longtime CEO.
Stefan Larsson was a rising star and head of Old Navy when he was tapped to take over from Ralph Lauren as CEO of Ralph Lauren Corp. While Larsson crafted a well-received strategic plan for the company, he didn’t jibe with the famous founder and left. But after waiting out his non-compete, he landed again at PVH Corp. and ultimately succeeded another executive bigwig, Manny Chirico.
What happens next with Schulman is now an open question.
For Capri and Idol, it’s back to business.
The company amended and restated its employment agreement with Idol. The agreement is open-ended and will terminate with six months of advanced notice or with “good reason.”
Like many other fashion companies, Capri has been bouncing back strong from the worst of the pandemic.
Idol said recently that the company added 11 million customers to its data bases over the past year and it’s on track to post revenues of $5.6 billion.
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