(Reuters) - Ralph Lauren Corp said Chief Executive Stefan Larsson, hired over a year ago to turn the company around, would step down following differences with founder Ralph Lauren over the direction of the luxury brand.
The company’s shares fell as much as 12 percent to a more than 6-year low of $76.86 in morning trading on Thursday.
Larsson, who was credited with reviving sales at Gap Inc’s Old Navy brand and has also and worked at H&M, was hired for his experience in managing fast-fashion businesses with efficient supply chains.
At the time, his appointment was considered a good fit for Ralph Lauren, which was seeking to reorganize and centralize business units and brands.
In his short tenure, Larsson embarked on a major overhaul of the company, calling it the “Way Forward Plan”, which included shutting down underperforming stores, cutting back on inventory and shedding about 1,000 jobs.
But things soured soon after.
Larsson’s cost-cutting plan, which involved replacing incumbents with his own people, hit morale at the 50-year old company, a fashion industry source said, citing people familiar with the matter.
Larsson’s approach could have been a cultural misfit with what Lauren had built over the years, forcing the board to step in, the source said.
Differences stemmed from the direction in which to take the company’s product, marketing and shopping experience, Larsson said on a call with analysts on Thursday.
Lauren, who is also the chairman and chief creative officer of the company, said they had different views on how to evolve the creative and consumer-facing parts of the business.
The company is yet to realize the benefits of the restructuring program, with revenue falling for the seventh straight quarter in its latest earnings report on Thursday.
The company’s shares have lost more than a fifth of their value since Larsson succeeded Lauren in November 2015.
Ralph Lauren said a search was being conducted for a new CEO. Until then, Chief Financial Officer Jane Nielsen will head the company’s restructuring program.
Lauren’s son David Lauren, who was appointed vice chairman in October, is a likely CEO candidate, the source said.
Larsson, who will stay on until May 1, will get $10 million in severance pay over two years and his bonus for the company’s 2017 fiscal year as part of his separation agreement.
He is also entitled to receive a pro-rated bonus based on his performance until he exits the company.
The company was recently in the spotlight for dressing up Melania Trump for Donald Trump’s presidential inauguration, leading to calls by some on Twitter to boycott the brand using the hashtag #boycottralphlauren.
Several top designers, including Tom Ford and Marc Jacobs, had publicly declined to dress Melania Trump for the inauguration.
Additional reporting by Siddharth Cavale in Bengaluru; Editing by Sriraj Kalluvila and Anil D'Silva