GPS Gap Inc

By Imani Moise 

A dispute over creative control led Ralph Lauren Corp. Chief Executive Stefan Larsson to leave the struggling luxury fashion brand after less than two years a the helm.

Mr. Larsson, a 42-year-old fast-fashion executive tapped to work alongside founder Ralph Lauren, said Thursday that the two men agreed the business needed to evolve but disagreed over the company's creative and customer-facing strategies.

"The board, Ralph and I have over the last month worked very hard to find common ground," Mr. Larsson said on a conference call Thursday with investors, calling his abrupt exit a mutual decision. "However, we have found that we have different views on how to evolve."

Mr. Lauren, 77, who is the company's biggest shareholder, executive chairman and chief creative officer, didn't participate in the call. In a press release, the founder said he was committed to the business plan and would continue "to move our business and iconic brand forward as we have done for the last 50 years."

Shares fell 11% to $77.42 Thursday morning, and are now down 30% over the past year. The company reported another slide in quarterly sales, as it closes stores, pulls back on discounts and jettisons some of its smaller labels. Executives said turnaround efforts were on track and promised smaller revenue declines next fiscal year.

Until a few weeks ago, all had been going well, according to a person familiar with the situation. Mr. Larsson had made strides streamlining the supply chain, with the help of new executives he had brought on board, and Mr. Lauren was supportive of the progress he was making.

Then, Mr. Larsson told Mr. Lauren that in order for him to be accountable for executing the business plan outlined in June, called "The Way Forward," he would need control of the creative side of the business, which was Mr. Lauren's domain, this person continued.

In particular, Mr. Larsson argued that he needed the ability to hire and fire creative talent, this person said. Mr. Lauren, who has overseen the creative side of the business since he founded his label in 1967, was unwilling to cede that control.

Tensions continued to bubble over the next few weeks, with the two men disagreeing over how the design, marketing and creative vision should evolve, another person said. The board met to discuss the impasse in recent days, and directors backed Mr. Lauren, this person continued.

Mr. Larsson will leave Ralp Lauren on May 1 and the company has started a CEO search. Its finance chief, Jane Nielsen, will lead the turnaround effort in the interim, the company said.

"Ralph is not interested in running the business day to day," said Ms. Nielsen.

Mr. Larsson took the helm in November 2015 amid sagging profit at the American fashion house. His strategy has been to focus on fewer brands and speed the company's supply chain. He has also started to slash costs, cutting jobs and closing dozens of stores.

He joined the company from Gap Inc.'s Old Navy, where he was credited with helping revive sales at the casual apparel brand. Previously, he spent 15 years at fast-fashion retailer Hennes & Mauritz AB.

For the fiscal third quarter, Ralph Lauren reported a profit of $82 million, or 98 cents a share, down from $131 million, or $1.54, a year earlier. Revenue fell 12% to $1.71 billion.

Executives said Thursday they expected sales to decline by midteens percentage for the fiscal year and to shrink by a mid single-digit percentage next fiscal year.

Write to Imani Moise at imani.moise@wsj.com

(END) Dow Jones Newswires

February 02, 2017 11:38 ET (16:38 GMT)

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