UPDATE: July 23, 2020: After much speculation, and amid reports that Tapestry had been investigating the now ex-CEO, Jide Zeitlin took to LinkedIn on Tuesday to explain his departure. In it, he referenced a prior relationship. "The allegations that I drew too close to the above woman are true; however, our relationship began and concluded 13 years ago, it had nothing to do with my role at Tapestry, and I did not use power, wealth, or position to further that relationship," he wrote.
While Zeitlin's departure comes "during an extremely volatile time for the company," the rationale leaves some room for optimism, according to Credit Suisse analyst Michael Binetti. "Due to the personal reasons given for the departure, we don't suspect any deeper financial/operational issues (beyond the obvious challenges during COVID)," he said in emailed comments Tuesday. "That said, [Tapestry's] high level of management turnover and vacancies leave us cautious on the medium-term strategic outlook."
Tapestry on Tuesday made the sudden announcement that CEO Jide Zeitlin has resigned, effective immediately, from the company and as chairman of the board "for personal reasons," according to a company press release.
CFO Joanne Crevoiserat will serve as interim CEO as the search for his permanent replacement begins; Andrea Shaw Resnick, global head of investor relations and corporate communications, is interim CFO. Lead Independent Director Susan Kropf has been named board chair.
Todd Kahn, the company’s president, chief administrative officer and company secretary, will serve as Coach's interim chief executive officer and brand president, a position Zeitlin had also held since March.
Tapestry had already been shaking up its C-suite amid the challenges presented by the COVID-19 pandemic, with Coach chief Joshua Schulman's departure in March and new leadership at the Kate Spade and Stuart Weitzman labels as of February.
The news has taken the industry by surprise. "The timing of Zeitlin's departure is unsettling given the challenging macro backdrop and unclear path to stabilize/improve Kate Spade and Stuart Weitzman," MKM Partners Managing Director Roxanne Meyer said in emailed comments, noting that Zeitlin had just put a new leadership team into place in March.
The company had also just affirmed then that Zeitlin, one of fashion's few Black executives, would stick around for the next three years to help it achieve some momentum. He had replaced Victor Luis as CEO last September. Luis had overseen a successful restoration of Coach, from a tired brand dependent on discounts to a luxury label, but a similar attempt at Kate Spade was faltering.
The pandemic has interfered with any progress the company had been making. Third quarter net sales fell to $1.07 billion from $1.33 billion the previous year as gross margin contracted to 67.1% from 69.2%. The company swung to a net loss of $677 million in the quarter from net income of $117 million the prior year. In April, the company also announced layoffs affecting about 2,100 part-time store associates, or about 10% of its workforce, across its three brands.
Tuesday the company said its fiscal fourth-quarter results, to be released in August, "though pressured by the Covid-19 pandemic, exceeded internal expectations from a top and bottom-line perspective," including year-over-year gross margin expansion and inventory declines.
"While this is a favorable result, we will need to better appreciate any shifts in timing of promotional events as well as the extent of inventory write downs," MKM's Meyer said, adding that while Tapestry "has minimal wholesale exposure," something that is affecting rival Capri, "we would expect significantly reduced tourism to negatively impact [Tapestry's] results."