Why Coach's former CEO says America's future depends on immigrants.

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Before it was known as Tapestry (TPR) and an owner of the Coach and Kate Spade Brands, Coach was just Coach — maker of handbags and accessories that dominated mall racks. But like with every retailer in business for decades, Coach has stories to tell. Yahoo Finance Executive Editor Brian Sozzi sits on the Opening Bid Unfiltered podcast with former longtime Coach CEO Lew Frankfort. Frankfort is out with a new memoir called "Bag Man: The Story Behind the Improbable Rise of Coach." The book takes readers inside the history of the accessories maker founded in New York City in 1941. Frankfurt joined the company in 1979 with no background in the fashion industry. By 1985, he was the president of Coach, CEO by 1995, and then led the company’s IPO on the New York Stock Exchange in 2000. He departed Coach as CEO in January 2014, but has stayed close to the company and the broader retail industry. Frankfort shares his journey through the C-suite and the lessons he learned along the way.

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Yahoo Finance's Opening Bid Unfiltered is produced by Langston Sessoms.

Video Transcript

0:00 spk_0

Welcome to a new episode of the opening bid unfiltered podcast here at the NASDAQ in Times Square. I'm Yahoo Finance executive editor Brian Sazi. Like I always say, this podcast will make you a smarter investor period, and we're in my wheelhouse today, all things retail and consumer, and this is also another one of these special episodes. I mentioned this when I just had, uh, Jim Cramer on the podcast, uh, recently. He was my long time for boss special episode, uh, for me there and.Episode for me here because I started my career as a retail analyst and one of the first companies I covered was a company then known as Coach. It's known as Tapestry now, but it was then known as Coach, led by longtime CEO Lou Frankfurt, uh, and Louis here, uh, former longtime CEO of Coach. Uh, when I was listening to you on these earnings calls way back when, Lou, I never thought one, I don't even know what a podcast was, let alone.Sitting across from you at a desk, uh, talk about these things, so it's really nice to see you and

0:54 spk_1

it's very nice to see you too.

0:56 spk_0

I had no clue what accessible luxury meant and I should mention, uh, Lou was out with a fabulous new book. It's called, uh, Bagman, which I think is very appropriate. We're gonna get more into this book, but I had, I had no idea what accessible luxury meant, uh, until I heard you on every single earnings call. What brought you into the, the fashion industry?

1:16 spk_1

It was, uh, serendipitous. I had, uh, spent 10 years in city government running, uh, daycare and Head Start during my last role. This is a childcare program and I was very client focused on children and families in need, and I took a cab ride one evening with a professor who said to me, um, I have a childhood friend, uh, who runs a small handbag company.And he's looking for a protege. Do you have any interest? And, uh, 4 interviews later, I accepted his offer. That was

1:52 spk_0

what was 1979, 1979. Wow. What was coach in those early

1:57 spk_1

days? Uh, coach was a, uh, maker of natural leather cowhide bags, durable, quality leather developed the patino over time.And even though the business was small, only $6 million it had a very loyal and devoted following. What

2:18 spk_0

drove that, that loyalty?

2:21 spk_1

The emotions and images that people have with their bag, uh, owning a bag for a woman is, uh, very personal. She opens it 50, 60 times a day, and the coach bag with its natural leather developed a patina over time. It felt good.Uh, you were able to keep your essentials in it. Coach represented value, uh, durability, superior craftsmanship, and in many ways authenticity. It was the real thing.

2:52 spk_0

I hope, uh, I know the tapestry team well. I hope they don't yell at me for calling a coat. it's coach you.coach at the time before they made that uh acquisition of what Kate Spade, um, so in those early days, you know, you're getting your, um, you know, feelers around and getting to learn the business. I mean, and then by what, 1995 you're president of coach, how did you go from now those entry level days to 1995 like

3:13 spk_1

thiscompany I actually became president in 1985,

3:17 spk_0

1985, sorry, 1985.

3:20 spk_1

I'm I became CEO in 1985.When I, after I helped the founder identify a company that, uh, he would be able to monetize the value, uh, the deal that I had made with him if I stayed on to help him through the transition was that he would leave the day of the sale.And even though he thought I wasn't ready yet to be CEO, he would tell the purchaser I was, and he kept his word. We became part of the Sarah Lee Corporation in 1985 and stayed there until the year 2000 when we went public.

3:59 spk_0

That is a that is something I think a lot of people don't realize that Coach, um, was owned by Sarah Lee. What was that?What was that like? I mean, food company. I mean, Sara Lee had great, uh, ambitions to own so many parts of the aisle, but then, oh yeah, they, they also own coach, a company making leather bags. Well,

4:15 spk_1

they actually, uh, had a very large portfolio of consumer, uh, products such as, uh, Haynes, Playtex, Champion, Aris Isotoner, uh, a glove company when the winters were cold, people wore gloves.And now, um, it's occasionally the case here in New York. So they did have a, uh, a history of packaged goods. Uh, they were attracted to coach because at the time, even though our sales were only $25 million when we met them, uh, we called ourselves a multi-channel business because, uh, we sold a wholesale, uh, we had department and specialty stores. I had started a catalog in 1980.And in 1981, uh, we opened our first retail store in Madison Avenue and, and, uh, it was before most American manufacturers, uh, reached consumers directly and it was a key strategy of our growth to, uh, develop, uh, channels where we would be available wherever consumers chose to shop.And that was our philosophy and they felt that um we might be able to help accelerate the learning and some of their other consumer packaged brands.

5:34 spk_0

And then you also took Coach Public.

5:36 spk_1

That's true that's

5:37 spk_0

wild, um, you know, like I mentioned my early.analyst years covering coach I was listening to you on earnings calls. I really, I just, I did every quarter, um, what and you're always passionate about talking about bags, talking about the different styles at the company like what drove that passion?

5:59 spk_1

Well, um, I loved Coach and I, I think I loved it from the beginning and, um, I believed in what Coach represented.And, uh, in the early years, I thought of Coach as a democratized luxury brand. In America, we don't have a tradition of, uh, high luxury. We're a country of immigrants and I felt coach as a brand at the time, uh, between mass and luxury.Uh, we, uh, occupied a, a, an important space in America because consumers were increasingly moving into the middle class looking for brands that they could believe in, brands that would deliver and exceed on their promise, and I thought that coach really mirrored, uh, the best of America and the best of New York. So my passion.It was from the beginning. I always led with purpose and belief, and I do believe that when, uh, you consider employment, whether as a CEO,Or in any leadership role or even in an entry level role. If you have the opportunity of choice, choose a company that makes a product or delivers a service in an environment that where you can thrive and excel and a product and service that you believe in.

7:26 spk_0

During your tenure, Lou, um, I saw some of the most, I saw some of the best stuff merchandise that the coach ever.Put out. I mean, you never seem to waver on quality when a lot of your competitors did in fact they mean they changed the hardware on it the gold plating would come off after it rained. I mean, I never got that at coach, you know, how hard is it to make decisions like that in such a competitive market?

7:50 spk_1

Um, Quality was built into our DNA from the beginning and I give the founder, Miles Kahn, great credit for, uh, producing a product that, um, he called a hero, and everything revolved around the product. Uh, I believe that product is the center of the coach story, but it's anchored by consumers, brand, and the marketplace. So it's in our DNA.From the beginning there was never a question in anyone's mind that we would ever compromise on materials or workmanship.

8:24 spk_0

Iremember all the different cycles, so, uh, the was it the sea bag had the moment when I was in college and it was such so popular then during the Great Recession, people didn't want to have a C or another logo on a bag, uh, because folks don't wanna seem like they were showing off like, where are we at now in the fashion cycle?

8:43 spk_1

It's, uh, where are they, uh.Inflection point. Uh, Gen Z, uh, today represents about 25% of luxury accessory spending in the United States. Uh, soon it will be 45%. And when I, when we think about, uh, Gen Z, we think about young men and women who are focused on.On, uh, we think about sustainability, we think about purpose, we think about authenticity, and what, uh, we have done at coach and what Todd Kahn and Stuart Vives are doing today is really focusing emotionally and culturally on what's relevant.And what's relevant to sustainability, authenticity, it's really reshaping luxury. Young people are very discerning and they want companies to follow, uh, ethics, uh, both in the workplace and in the choice of materials. They're looking for products that will enable them to express themselves, not in the traditional sense of fine luxury. Uh, the resale market is real strong.And that's gonna only get stronger vintage bags.

10:01 spk_0

Does this generation want to have less?Are they, I guess, maybe more inclined to pay up for an amazing product from Coach than try to, I don't know, pay less and own 10 differentproducts.

10:14 spk_1

That's a great question. I think on the, uh, for the most part.They want to have products on in their wardrobe that they believe in, uh products that reflect their values, and they would rather pay they would rather pay more for a coach bag than uh perhaps an unbranded bag that won't have the durability, the sense of expression that coach has.

10:41 spk_0

All right, hang with us, uh, Lou, we're gonna go off for a very quick break. We'll be right back on opening bid unfiltered.All right, welcome back to Opening bid Unfiltered here at the Nasdaq in Times Square. Having a, a really cool chat, uh, one that hits home. Uh, Lou Frankfurt, former CEO of Coach. So, um, Lou, you left Coach what in 2014. That's correct and almost 12 years later you're back with this book. I'm not saying you haven't been busy. I mean, investing, advising a lot of CEOs, doing you. I mean, why do you feel so compelled to to write this book, uh, at this point in time?

11:17 spk_1

I had multiple motivations. Uh, one, on my, uh, my children and others encouraged me to tell a real story, not only about, uh, leadership and values or building an iconic brand, but also on, on my fear of failure, uh, mental health, and, uh, I come clean and I do this, uh,To basically help younger people understand that life is not just a bowl of cherries that you can have a lot, and I encourage people in my book to listen to their bodies and if their bodies are telling them through a lack of sleep, fatigue, backache, um, that, um, things aren't good, they need to both address their.Well, physical well-being and mental health,

12:11 spk_0

what toll did being the CEO for all those years of coach take on you?

12:17 spk_1

It, um, I'm still here and

12:21 spk_0

it's great. Oh, it's very nice to see you.

12:22 spk_1

Let's start that I'm still here and I'm, I, I've been really focused on healthy aging, which is really listening to my body, routines and rituals, exercise.Meditation, massage, acupuncture, uh, therapy when needed, and I encourage everyone, uh, to really be mindful um that you want your bodies to work for you and there's no compromise. I also encourage employers, companies where we invest to be conscious of the total person.Including their mental health,

13:01 spk_0

you talk a little bit, uh, in the book about, um, depressive episodes like how did you manage the highs and lows of being a very visible public company CEO in some respects some would see you, I almost saw you as the founder. I know technically you're not the founder, but when you lead the company for that many years, you're, you're the face of the company.

13:22 spk_1

Well, um, over the, over the years.I developed better techniques to, uh, anticipate, uh, uh, where I was traveling. So if I was going into a place where, um, it was gonna be dark, I asked myself why and, and what control do I have over that and what should I do about that and doubling down on.Exercise, uh, compartmentalization where you work real hard to have time to engage with friends and family and yourself to refuel napping or a variety of techniques over time. And I also learned in the workplace to understand, uh, when my, when my, uh, when I'm feeling stressed during a meeting, even though I may not be at the beginning of the meeting.Before I might pounce on someone, I ask myself, why do I feel that way? What do I want to, how do I want to address that and what kind of outcome do I want? And my behavior generally varies with the person and the situation. So self-regulation is important aswell.

14:33 spk_0

Do you have an academy I could sign up to, because it feels like you, I mean this is.I find this all very helpful and and well timed, um, for me for many, for many reasons we'll take that offline. I can't be totally unfiltered here on the podcast. I can't give everybody everything. um, do you think CEOs, you're seeing more burnout with CEOs now? Are you, are you seeing more burnout with CEOs nowadays?

14:53 spk_1

I'm seeing, um, younger CEOs, um, much more, um, attuned to, um, their, uh, well-being.Uh, not all of them, uh, clearly we have lots of hardwired narcissists who, uh, who become, uh, who think they know more as the business gets bigger as opposed to being more humble. I try to avoid that. One of the, uh, challenges for me is that I'm often attracted to great ideas and, and may not be as immersive in the way I critique someone.Because of those ideas and frequently, I regret that if I invest and work actively with someone because frequently they're not coachable when, um, they should be they should be humble, uh, they're not.

15:46 spk_0

Uh, I have to ask you a little bit about, you know, the state of, of retail. I mean, so many big retailers are dealing with with tariffs. I mean, the supply chains are changing. Can we make awesome bags and accessories in the US and, and make them profitably?

16:03 spk_1

Uh, the answer is yes, although.Uh, if you want to give consumers the best possible value, you really need to make most of your products outside the United States, still out of the finest possible materials, supervised by leaders and craftspeople who really understand make. We live in a global economy and I believe that, um, we will return to that. I think the tariffs that are in place today and threatened for tomorrow.Is, uh, something that we're gonna live with through this administration, uh, but over time we can only succeed as a global economy. You

16:46 spk_0

know, if you were still leading a, a retailer, a global retailer like what would you, how do you manage to something likethis

16:53 spk_1

carefully? I think you need to be very mindful of everything you do, uh, and certainly, uh, you want to be thoughtful before you pass on.Costs to consumers of and you also want to be mindful of not putting your suppliers out of business when you press that for to participate with you. Uh, you need to be thoughtful and mindful and recognize that, uh, consumers during this time might be more inclined.To purchase less expensive products and you might develop more entry level products for those consumers who are discerning and concerned withexpense.

17:37 spk_0

I recently spent uh a good day with uh Ford CEO Jim Farley in Detroit and the theme of his conference at the time was, uh, they can't get workers to.Fill critical jobs he mentioned that they currently have 6000 open positions at uh auto mechanics. I mean, I was just really struck by that. Is it that the US doesn't have someone who could stitch amazing bag together or doesn't have that skill? Is that the problem.

18:03 spk_1

50 years ago, uh, we had those skills with our immi immigrant population and it helped us become a prosperous and leading nation in the world and on our country depends on new populations to, uh, to fuel jobs that Americans have graduated from whose children may not want the same jobs that their parents had.And, uh, the reality is that many, many jobs are remaining unfilled in the United States and it will become a significant problem in the service industries in farming, uh, in, in, uh, in, in factories in, uh, other other enterprise in the months and years ahead if we don't find a way to attract.Immigrants from 2nd and 3rd world countries who want to live the American dream,

19:05 spk_0

um, at the end of the, the program we always love to get a hot take from our, from our guests, um, nothing planned here, um, I am convinced that.You came up with the majority of the names for coach handbags, um, you would always mention them on earnings calls like how does a name for a handbag come about? I mean, coach bags, I don't they have names. They still do.

19:28 spk_1

Yes, and the reason they have names is because.You wantUh, women and men to be able to identify the particular bag they have. Again, they're attached to their bag emotionally. They have images and associations. It's a lot easier if you know someone and you know their name because if you have a bag and it's the Brooklyn bag, you know, it's a Brooklyn bag and you can proudly say that.If it's a no-name bag, um, you're not gonna have that type of intimacy with a bag. So naming bags, uh, is an odd in science. It's a blend of magic and logic, and you try to identify not only the personality.Of the potential user but the attributes of the bag and what does it stand for and coach is a New York brand even though we are also a global brand.

20:26 spk_0

Um, lastly, Lou, um, look, I mean, you and your dad was a police officer, right? New York City police officer, um, you've come a long way like how would you summarize your entire, you know, corporate career?

20:42 spk_1

I really believe that life has, uh, two parts. One is purpose and relationships, and I've been fortunate through my career starting in government and through my coach world to really have belief in what I was doing and to be able to attract and motivate.Uh, teams that were able to focus on the greater good, teams that were highly collaborative, extremely curious, and create a culture that is a learning environment. Uh, the thing that I'm most, uh, proud of today is that, um, coach has become a legacy brand. It endures over generations in the minds.And hearts of men and women around the world and that to me, uh, is my, uh, ultimate, uh, quest when I began with Coach, it was a small business in the Northeast. We ran out of product, uh, by Thanksgiving. We sold to anyone who paid their bills and.Uh, today, um, our coach is a, uh, global powerhouse. However, there's no complacency on the part of the leadership team. They work every day to understand where consumers were, where they are today, and when they're traveling tomorrow. And their focus on Gen Z is right on smart.

22:11 spk_0

It was a real treat for me to see you. Um, I remember being sad when, uh, that news cross that you were leaving and that's, you know, full stop. Uh, you taught me a lot about retail. You may not have realized who else is listening on those earnings calls way back when, but, uh, I was definitely listening, uh, Lou Frankfurt, former CEO of.Dot tapestry that his coach friends, uh, get his new book, uh, Bagman. It's just a fascinating read. How'd you pick this

22:33 spk_1

bag? Uh, bag was part of our line for 75 years, some form of it. I mean, again, we've been in the hearts and minds of consumers for a long time and the intention of the leadership team and everyone working with coaches to continue that for.Decades to come. Oh,

22:50 spk_0

good to see you. Uh, congrats on this book and that's it for the latest episode of Opening Bin Unfiltered here at the Nasdaq in Times Square. Uh, continue to hit me with all that love on YouTube, social media platforms. I love all the feedback. It makes me better at doing these interviews, and I really, really appreciate it. We'll talk to you soon.

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