Victor Luis’ reign as Tapestry Inc. chief executive officer has come to an end.
The parent company of Coach, Kate Spade and Stuart Weitzman announced the news Tuesday, saying Luis is leaving the company and its board of directors, and board chairman Jide Zeitlin will assume the CEO role, effective immediately.
Susan Kropf, a member of Tapestry’s board, has been named Lead Independent Director.
Zeitlin, who has been on Tapestry’s board for over a decade, and has more than 30 years of global financial and operational experience, including 20 years at Goldman Sachs where he held a number of senior management positions, will initially work on driving the company’s business performance with the objective of creating long-term sustainable growth.
The company said at the “appropriate time, Mr. Zeitlin, with his board colleagues, will lead a search for a future chief executive officer.”
Citing Luis’ contribution to the Coach brand’s development outside of North American and oversight in transforming Coach, Zeitlin said Luis helped establish Tapestry as a modern “house of modern luxury lifestyle brands.”
“Coach, Kate Spade and Stuart Weitzman have powerful and differentiated positioning, strong consumer connections and attractive growth potential. Together with a talented management team that combines long-tenured executives with new leaders who bring fresh perspectives, we will act with urgency to drive sustainable organic growth,” Zeitlin said.
Kropf affirmed the board’s commitment to Tapestry’s multi-brand model, although she noted the need to sharpen the company’s focus on execution. With continued strength at Coach, Kropf said the top priority is driving improved performance at Stuart Weitzman and Kate Spade.
“Together we have energized the Coach brand, while creating a unique portfolio with the acquisitions of Stuart Weitzman and Kate Spade,” Luis said in a statement. “I am proud to have led the talented individuals at Tapestry and of the culture rooted in optimism, innovation and inclusivity that we’ve built. I am confident in the boundless potential of these teams and brands and very much look forward to following their future success.”
Tapestry said it is maintaining its Fiscal 2020 financial outlook and expects to return roughly $700 million to shareholders through its dividend and repurchase programs. When the company posted fourth quarter results last month, it guided revenues to increase in the low-single-digit rate from Fiscal 2019.
In the fourth quarter, net income dropped 29.7 percent to $148.9 million on a 2 percent gain in net sales to $1.51 billion. The problem brand was Kate Spade, which saw global comps fall 6 percent, versus Wall Street’s expectations of a 1.6 percent increase.
Randal J. Konik, analyst at Jefferies, said Wednesday that the change in leadership wasn’t a surprise since he considers the multi-brand strategy “flawed as the portfolio was constructed on synergies and less on longevity of brand potential.” He expects the Kate Spade brand to remain a drag on the company’s performance.
The strength of the Kate Spade brand, according to Konik, was a question mark at the time of the acquisition, and many of those same questions remain. Currently, e-commerce at the brand remains strong, but “store comps are bad and promos are up.” Without brand momentum, any synergies initially obtained from the acquisition could reverse course, he said.
“Put simply, the brands in the Tapestry portfolio are not high-luxury, which creates risk for sustainable pricing power and gross margins,” Konik said.
Tapestry acquired Kate Spade in May 2017 for $2.4 billion. At the time, Tapestry was still operating under its former moniker, Coach Inc.