TPR Tapestry Inc

By Suzanne Kapner 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 5, 2019).

The handbag company that combined the Coach and Kate Spade brands ousted its chief executive a little over two years after a merger that was supposed to create a U.S. fashion powerhouse.

Tapestry Inc. said Wednesday that Victor Luis, who has been CEO for five years, is leaving immediately and will be succeeded by board Chairman Jide Zeitlin. Mr. Zeitlin is a former Goldman Sachs Group Inc. executive who has been on the board since 2006.

Coach changed its name to Tapestry in 2017 after spending $2.4 billion to acquire Kate Spade & Co., a U.S. rival whose founder was no longer involved in the brand.

Mr. Luis viewed the deal as a way to reach younger shoppers and build a collection of brands that could better compete with European rivals. In 2015, Coach purchased the Stuart Weitzman footwear brand.

But the Kate Spade brand has struggled. Sales at Kate Spade stores open at least a year fell 6% in the three months that ended June 29, and the brand's margins contracted on higher discounting. That prompted Tapestry to lower earnings guidance for the year, which sent its stock plunging 22% in a single day. The shares have fallen by more than half during the past year.

In an interview, Mr. Zeitlin said the company was committed to its multibrand strategy, but needed to work on execution. "There has been a gap between strategy and delivery," he said.

Tapestry's other two brands, Coach and the much smaller Stuart Weitzman, have performed better. Sales at Coach stores open at least a year rose 2% in the latest quarter.

But some analysts question the portfolio, saying it isn't built on strong brands. "Tapestry's strategy is flawed," said Randal Konik, an analyst at Jefferies. "The Coach brand is stagnating" and the "Kate Spade brand is a big problem."

Mr. Zeitlin, who will remain board chairman, said he wasn't planning any management changes at Kate Spade or elsewhere in the company. He said the board plans to begin a search for a permanent CEO at some point in the future. The company also said board member Susan Kropf, a former Avon executive, has been named lead independent director.

Tapestry said Wednesday it is maintaining its recently lowered fiscal 2020 financial outlook and continues to expect to return about $700 million to shareholders through its dividend and repurchase programs.

Coach, Kate Spade and Stuart Weitzman have battled a challenging retail environment, especially for designers with significant exposure to department stores, where traffic has declined.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com

(END) Dow Jones Newswires

September 05, 2019 02:47 ET (06:47 GMT)

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