GPS Gap Inc

By Ray A. Smith And Suzanne Kapner 

Ralph Lauren is stepping aside as chief executive of the fashion empire he built over five decades, appointing an Old Navy and H&M veteran to help run his business, which has stumbled this year.

Mr. Lauren, who will turn 76 next month, hired Stefan Larsson, the global president of Gap Inc.'s Old Navy division, to serve as CEO of Ralph Lauren Corp. The designer-founder will remain as executive chairman and chief creative officer.

In an interview Tuesday at his Madison Avenue office, Mr. Lauren said he would stay active in the company, and was bringing on a partner with the skills to help it expand.

"I'm excited about my business, and I'm not leaving," he said. "It's a public company, and we have a responsibility to have the right leadership."

Mr. Larsson, who is 41 years old, had been in his Old Navy role since 2012, and is credited with helping revive sales at the casual apparel brand. Previously, he spent 15 years at fast-fashion retailer H&M. He will join Ralph Lauren and its board in November.

The executive will be taking the helm of a company similar in size to Old Navy, which had $6.6 billion in sales last year and operated more than 1,000 stores. But Ralph Lauren's business model is far more complex, consisting of multiple product lines and retail channels around the world.

The choice of an outsider as CEO comes as Ralph Lauren, which had $7.6 billion in sales last fiscal year, is trying to shore up its business, whose sales and profit have sagged this year. Shares have fallen about 44% this year through Tuesday's close, erasing nearly $5 billion in market value. Following news of the new CEO, they were up 4.7% at $109 in after-hours trading.

Mr. Lauren said he had been thinking about bringing on new management for several years. His longtime lieutenant Roger Farah left in May 2014 and is now co-CEO of Tory Burch. Mr. Lauren's son, David, is an executive vice president at the company and was considered by some investors as a potential successor.

Mr. Lauren said he was introduced to Mr. Larsson through an executive recruiter and the two met face to face for the first time "a while ago" over dinner at Sette Mezzo, an Italian restaurant in New York.

"We connected in five minutes," Mr. Larsson said. "Ralph surprised me by being so focused on growth."

The appointment marks the latest changing of the guard at a big American fashion house. Donna Karan stepped down as chief designer from the company she founded earlier this year. Oscar de la Renta passed the baton to designer Peter Copping in October 2014, shortly before he died. But none of those designers held the post of CEO.

Ralph Lauren also said Tuesday that its No. 2 executive, President and Chief Operating Officer Jackwyn Nemerov will retire in November, and will become an adviser to the company.

Ms. Nemerov, who became president in 2013 after about a decade with the company, was in the process of restructuring the business around global brands to make it more nimble, but results have been disappointing.

In February, Ralph Lauren reported an unexpected slowdown in traffic at its retail stores, amid heavy discounting by rivals. In August, the company said quarterly retail sales, excluding newly opened or closed stores, fell 8%.

Mr. Lauren rose from modest roots in the Bronx to become a fashion powerhouse infatuated with the mores of America's privileged class. He founded his company in 1967, beginning with a line of neckties under the Polo name. It now encompasses men's, women's and children's wear and home furnishings. More recently, the company has put more emphasis on the luxury side of its business and international expansion.

Mr. Lauren remains the single largest shareholder, with voting power of more than 81% of the common stock.

On Tuesday he said he could foresee entering new lines of businesses, as the company has with the recent opening of the Polo Bar, a restaurant in midtown Manhattan. "I felt Stefan needed to be CEO to do all the things that need to be done," Mr. Lauren said.

The recruitment of Mr. Larsson is the latest example of luxury companies broadening their search for talent outside what had typically been an insular industry. LVMH Moët Hennessy Louis Vuitton recently hired an Apple Inc. executive as its chief digital officer. Chanel SA's CEO spent 15 years at Gap before joining the French luxury brand.

"You see a lot of luxury brands now recruiting from other industries," said Milton Pedraza, the CEO of the Luxury Institute, a research firm. "They need executives with skills the luxury industry doesn't necessarily have such as an expertise in global distribution or digital marketing."

Mr. Larsson will leave his role at Old Navy on Oct. 2. He will be succeeded on an interim basis by Jill Stanton, executive vice president of Global Product at Old Navy. She will report to Gap Inc. Chief Executive Art Peck. A search for a new global brand president is already under way, Gap said.

Write to Ray A. Smith at ray.smith@wsj.com and Suzanne Kapner at Suzanne.Kapner@wsj.com

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(END) Dow Jones Newswires

September 29, 2015 19:48 ET (23:48 GMT)

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