Until recently, Frankfort's failure dreams were likely regarded by employees as a reminder not to take success for granted. Coach, which is virtually debt-free, had seen 24 consecutive quarters of high-double-digit earnings growth. Since 2004, it has opened 94 new locations, along with dozens of discount outlet stores, all of which sent revenue soaring. The stock, which made its debut in 2000 at a split-adjusted $2 a share, increased 2,000 percent in just over six years. At the 2006 annual meeting, investors rose to their feet and applauded as Frankfort entered the room. That year, his compensation, closely tied to the stock price, was $44.4 million, in the same league as Wall Street giants like Lloyd Blankfein of Goldman Sachs and John Mack of Morgan Stanley.

This year, Frankfort is not likely to receive much of an ovation. Sales in stores at least a year old—considered the most important metric in retail—fell 1.1 percent last quarter, compared with an increase last year of 21 percent. Revenue and earnings growth both slowed, and foot traffic was off. Not long before the fourth-quarter numbers were announced, Goldman Sachs lowered its recommendation from "buy" to "neutral," sending the stock down further, and Wall Street Strategies, an influential independent newsletter, advised investors to limit their exposure. In July, when the company's fiscal year ends, Frankfort's compensation will return from the stratosphere, shrinking to about $3 million.

"I'm not a Teflon C.E.O.," he says over breakfast in his office, which is kept at an attention-focusing 55 degrees, even in winter. His shirtsleeves are rolled up, and a pair of reading glasses hangs from a long chain around his neck. "I'm not the sort of person who will cover up his fears by pontificating about things he knows nothing about or who'll act as though nothing bothers him. I don't think my vulnerabilities make me weak. I think, as our results have proven over the years, they make me smarter."

Frankfort joined the company in the late 1970s, as head of business development. His career path had been unusual; he earned a degree in political science from Hunter College, an M.B.A. from Columbia, and spent an unfulfilling year at an investment bank. He worked for the next 10 years in Mayor Ed Koch's administration, learning to measure results and streamline bureaucracies by running programs like Head Start. After being passed over for a promotion, Frankfort left and was introduced to Lillian and Miles Cahn, the Greenwich Village couple who founded Coach in 1941 as a manufacturer of men's wallets. Using baseball-glove leather to make sturdy bags, the Cahns, with the help of designer Bonnie Cashin, created a mainstream alternative to the psychedelic styles in vogue during the 1960s.

By the time Frankfort arrived in 1979, Cashin had long since departed, and the brand needed to be revived. In 1982, he opened Coach's first retail store, at Madison Avenue and 57th Street. By 1985, revenue had climbed from $6 million to $19 million, and Frankfort had been named president. Later that year, he engineered a sale to Sara Lee, which he chose because it was known for letting its far-flung divisions manage themselves. The Cahns retired and moved to upstate New York, where they ran Coach Farms, a maker of goat cheese that they recently sold.

Frankfort's financial rigor—inspired, he says, by practices he learned from Sara Lee—kept Coach growing into the early 1990s, and he was named C.E.O. in 1995. But by the end of the decade, its workmanlike products had been eclipsed by new styles from European designers like Miuccia Prada and Gucci's Tom Ford. The company's annual revenue, which had hit $540 million by 1995, started to drop. "They were changing women's relationships to their handbags," says Frankfort. "I realized that Coach had to be radically transformed to respond."