Coach names new chief amid expansion push
Handbag maker seeks to transform into lifestyle brand to counter falling sales and competition
Coach, the largest luxury-handbag maker in the United States, named Victor Luis, the head of the company's international business, to succeed chief executive Lew Frankfort next year.
Frankfort, who was appointed chief executive in 1995, would become executive chairman as of January, the New York-based company said on Thursday.
Coach named Luis president and chief commercial officer in the interim and said he would also join the board.
The company's North American same-store sales have fallen amid economic pressure on consumers and growing competition from Michael Kors, Fifth & Pacific's Kate Spade brand and Tory Burch.
It is working to transform into a lifestyle brand by building on its footwear, jewellery and clothing lines to help expand its business.
"The succession comes at a time when the company is undergoing significant strategic changes," Liz Dunn, an analyst with Macquarie, wrote in a note. "[It] is the right move to support Coach's geographic growth opportunities and expansion into new lifestyle categories."
Frankfort, 66, joined Coach in 1979 as vice-president of new business development. In 2000, he led Coach's transition to a publicly traded company and built it into the dominant US handbag company, claiming a 30 per cent share of the market. The company's annual sales were US$953.2 million in 2003 and will be US$5.1 billion this financial year, according to analyst estimates.
Frankfort was "highly regarded" in the industry, Dunn wrote. While "there are sure to be some who view this transition with disappointment", he would still be actively engaged in the business.
Frankfort presided over a constant pace of handbag collection launches, with names such as Poppy, Madison and Kristen, culminating in a Legacy line introduced last year that harked back to the firm's original streamlined and chunky leather look.
He oversaw expansion in China, where the company had built up 117 stores by the end of December, and in recent years targeted male customers with stores of their own and dual-gender locations. He also supported Reed Krakoff, the firm's executive creative director, in developing the namesake Reed Krakoff luxury women's apparel and accessories line.
Luis led Coach's businesses in Japan and China before becoming president of international retail in 2010 and then head of all its operations outside North America in February last year. Before joining Coach, he ran the North American operations of French luxury brand Baccarat.
"It is telling that the company, despite recent challenges, still picked the successor that most signalled its emphasis on top-line growth," Dunn said.
Luis had presided over the firm's most significant growth drivers over the past seven years, she said.
Coach reported fiscal second-quarter profit that trailed analysts' estimates last month as sales at stores open at least a year in North America fell 2 per cent. Net income rose 1.5 per cent to US$352.8 million, or US$1.23 a share, in the three months to December. Analysts on average projected US$1.28.