Longtime Coach Inc (COH.N) Chief Executive Officer Lew Frankfort will step down in January and be replaced by the executive who has overseen the upscale leather-goods maker's successful expansion in Asia, the company said on Thursday.
Frankfort, who joined Coach in 1979 as vice president of new business development and built it into one of the biggest names in high-end yet affordable handbags, will stay on indefinitely as executive chairman after his successor, Victor Luis, takes the reins next year.
Luis, 46, was named chief commercial officer until then and will head all business units, merchandising, licensing and strategy, in part to deepen his understanding of Coach's business in North America, where sales have cooled.
Coach said the appointment was the result of a multiyear succession process in which it considered both internal and external candidates. Frankfort's contract was set to expire in July after an extension four years ago.
"This is going to be a seamless transition," Frankfort, 66, told Reuters. "We are aligned on business direction and strategy."
Frankfort, known for his Bronx accent, is credited with transforming Coach from a tiny niche player into a major leather accessories brand. Wall Street analysts expect the 72-year-old company to report sales of $5.1 billion for the fiscal year ending in June. In 1979, sales were $6 million.
But more recently, Coach has hit some speed bumps. During the holiday quarter, comparable-store sales fell in North America as the company faced growing competition from Michael Kors Holdings (KORS.N) and Fifth & Pacific Cos Inc's FNP.N kate spade, among others.
At Wednesday's close, Coach shares were down about 40 percent from a high last March on fears that the company's days of fast growth are over. On Thursday morning, they fell 0.8 percent to $48.36.
Luis' success in building up Coach's business in China, the world's fastest-growing market for luxury goods, was a key reason he got the CEO job.
Luis joined Coach in 2006 as head of its unit in Japan, its second-largest market after North America. Two years later, he took on the company's expansion in China, where sales rose 40 percent last quarter.
"The company and the board figured that the future is Asia," Morningstar analyst Paul Swinand said.
Still, Luis does have management experience in Coach's home market. Before Coach, he ran the North American business of French luxury brand Baccarat and earlier held marketing and sales jobs at French luxury group LVMH (LVMH.PA).
When Coach reported results that disappointed Wall Street in late January, it also announced plans to become a "head-to-toe" lifestyle brand by significantly increasing its offering of shoes and clothing and updating the look of its stores.
Luis said no one should expect his appointment to signal a radical change in Coach's strategy.
"This is not a revolution in terms of management at Coach," he told Reuters. "It is a smooth succession."
(Reporting by Phil Wahba in New York; Editing by Gerald E. McCormick and Lisa Von Ahn)