* Marc Jacobs to float own label - source
* Move follows series of Vuitton management changes
* Nicolas Ghesquiere tipped as possible successor
By Astrid Wendlandt and Pascale Denis
PARIS, Oct 2 (Reuters) - Marc Jacobs, the star designer who turned Louis Vuitton from a staid luggage-maker into one of the world's biggest luxury brands, is leaving to focus on floating his own label, a source close to the French company's parent LVMH said on Wednesday.
The move follows a series of leadership changes at Louis Vuitton, LVMH's biggest profit- and revenue-contributor, aimed at helping the brand regain some of its lost prestige after a decline in sales growth over the past year.
"Marc Jacobs is leaving Vuitton and will focus on his own brand," the source said on condition of anonymity.
LVMH and Marc Jacobs declined to comment, but the source said the designer aims to float his business - which is estimated to generate sales of around 500 million euros - in an initial public offering.
"There is an IPO project for the MJ brand," the source told Reuters.
Some industry observers have suggested Jacobs has been encouraged by the success of Michael Kors, the U.S. brand whose shares and sales have been enjoying stellar growth since its IPO late last year.
LVMH owns nearly all of Marc Jacobs International, the operating company, while the trademark ownership is split equally between LVMH, Jacobs and Jacobs' partner Robert Duffy.
"Marc Jacobs' departure is not a big surprise," said analyst Antoine Belge at HSBC. "But if the IPO is confirmed, LVMH will loose one of its fastest growing brands."
LVMH shares were down 2.3 percent in late trading in Paris.
Jacobs' departure after 16 years with the company comes a month after LVMH founder and chief executive Bernard Arnault appointed his daughter Delphine as deputy head of Louis Vuitton and replaced last year longstanding chief Yves Carcelle with group veteran Michael Burke.
Louis Vuitton, which built its name and profitability on its LV-embossed canvas bags, has been suffering from cooling demand in Asia and consumers' growing preference for no-logo products.
Over the past year, the brand has put brakes on its expansion to preserve its exclusivity in response to fears it was becoming too ubiquitous, which contributed to its sales growth halving to around 5 percent.
Last month, it hired accessories designer Darren Spaziani, formerly with Proenza Schouler, to strengthen its high-end offering of leather bags.
Nicolas Ghesquiere, a darling of fashion editors, who left Balenciaga last year after having successfully revamped the Kering fashion brand, is seen as a frontrunner to replace Jacobs.
"It would be a positive sign if Ghesquiere joined Louis Vuitton as he is one of the most coveted designers today and he would give a creative jolt to the brand," said David Da Maia, analyst at brokerage Aurel BGC in Paris.
Arnault has been regularly changing the creative and management teams of his fashion brands to refresh their style and drive expansion.
LVMH's Celine has been doing well since award-winning designer Phoebe Philo took its creative helm in 2008 while Riccardo Tisci has brought new vitality to Givenchy since his appointment in 2005.
Jacobs, whose theatrical fashion shows contributed to heightening the brand's profile, introduced collaborations with artists such as Richard Prince, Takashi Murakami and Stephen Sprouse and recently rapper Kanye West to help make the brand more appealing.
Jacobs, a bearded 50-year-old American, is regarded as one of the most respected and influential designers in the fashion world.
While Jacobs has not said anything about his departure, he once said in an interview on the Louis Vuitton website, for which he wore a dark kilt and two ear studs: "Change is a great and horrible thing. People love it and hate it at the same time. Without change you just don't move."
Jacobs on Wednesday presented his last collection for Louis Vuitton, an all-black swan song that incorporated elements from his past shows such as the train station he once created and the slow-turning white carousel carrying models, including Kate Moss, of two years ago.
Today, the Marc Jacobs brand and particularly its more accessible line Marc by Marc Jacobs, are among the most profitable fashion subsidiaries within LVMH, enjoying strong demand in the United States and Japan.
Marc Jacobs also launched a cosmetics line in August in the United States, with distribution handled by Sephora, LVMH's beauty products retail chain.
At the age of 24, Jacobs was the youngest designer to receive the New Fashion Talent award from the Council of Fashion Designers of America. After graduating from the Parsons New School of Design, Jacobs worked for Perry Ellis and created his own label in 1984 with Duffy.
He became Louis Vuitton's artistic director in 1997.
When Dior sacked John Galliano two years ago after a video showed him making anti-Semitic comments in a Paris bar, Jacobs was one of the leading contenders to replace him but according to reports, talks fell through over terms. In the end, Dior took more than a year to appoint Raf Simons as its new designer.