London Fog Corp. boss Arnold P. Cohen was already vehemently disliked by his employees. Closing factories, laying off hundreds, overhauling sacred-cow business strategies and moving a headquarters 200 miles has that effect on people.

But it was when he started angering the customers that he really got into trouble.

The aggressive Mr. Cohen, who seemingly jammed a decade's worth of controversy into his year as London Fog's chairman and chief executive, unexpectedly left the job two days ago at least in part because he had alienated major department stores that ** buy the company's famous raincoats, retailers and fashion experts said yesterday.

A zealot for change in a company under severe financial pressure, Mr. Cohen had already burned up sizable amounts of good will inside London Fog, even among other managers, said people who are familiar with the company.

His insistence this summer that retailers limit discounts on his company's premier London Fog raincoat brand resulted in lower orders for the coming fall and winter seasons, sources said -- something that did not sit well with the company's Wall Street owners.

"He was operating the brand assuming the retailers couldn't live without him," said Alan Millstein, a New York retail analyst. "They retaliated, I am sure, by increasing their purchases of private-label raincoats" and cutting London Fog orders.

Mr. Cohen couldn't be reached for comment yesterday. Representatives of Merrill Lynch Capital Partners and GKH Partners, London Fog's owners, did not return phone calls.

But store operators and retail analysts said that Mr. Cohen had been trying to make the London Fog brand into a high-priced Cadillac of raincoats in a business where discounts and promotions, not labels, have been driving sales lately.

When a store presents customers with a rack of marked-down raincoats and a rack at full price, "they'll go to the ones on sale" no matter what the brand, said a coat buyer for a major New York-based department store chain.

Mr. Cohen, however, threatened to cut off stores that put London Fog on sale too soon in the selling season. "I'm sure that there were people at the highest levels that were tired of his cavalier attitude of, 'If you don't play my game, I'm not going to ship,' " said the buyer, who asked that his company not be identified.

Other retailers agreed.

"If I want to, say, hold an October anniversary sale, and everything is 20 percent off, they say I can't do it," said Jack Gottlieb, president of Shuttler's Apparel Inc., a small-store operator in Cleveland. "I want to be able to run my business the way it needs to be run."

The internal friction Mr. Cohen generated at privately held London Fog may also have helped to cause his exit.

"They're celebrating in Eldersburg, that's for sure," said Mark Millman, head of Millman Search Group, a national retail executive placement firm that is based in Baltimore. Eldersburg, in Carroll County, is the site of London Fog's distribution center, which employs more than 600.

Mr. Cohen "is a visionary guy, but he has problems with execution," Mr. Millman said. "His people are very relieved he's going."

Even so, London Fog won't reverse its decision to close three Maryland plants employing 700 by the end of October and shift production to overseas contractors, the company has said. The management change has given government and union officials new hope that they'll be able to find a solution, however.

The plant-closing announcement, made in July, was only the latest in a series of traumatic changes initiated by Mr. Cohen, 38, since he arrived at London Fog last August. He closed three other factories, employing 575. He moved London Fog's

headquarters from Eldersburg to Darien, Conn., where he lives.

He cleaned house among middle managers. He merged with Pacific Trail Inc., a Seattle-based maker of ski jackets and other outerwear. He refocused the merchandise, aiming parts of it at younger, more cost-conscious buyers. He shrank the sales staff.

It's true that the pressure for change was great.

The subject of a leveraged buyout several years ago, London Fog was burdened by long-term debt of $163 million, equal to 70 percent of its assets, as of February 1993. It was meeting interest payments, but wasn't nearly profitable enough to sell stock to the public -- the way LBO artists usually make their money.

Mr. Cohen's job was to put London Fog, which generates about $300 million in annual revenue, in shape for a public offering or other sale.

He wasn't averse to spending lavishly at the pinched company, however. He refurbished the executive offices in Eldersburg, a big expense, and soon afterward moved the headquarters to Connecticut -- another pricey decision. He was known for chartering jets with several other managers to visit stores around the country.

With the plant closures and other layoffs, however, Mr. Cohen did succeed in reducing overall costs. But other moves yielded mixed results. The company's lower-priced Towne coats haven't caught on with discounters the way managers hoped, retail analysts said.

The abrupt, sweeping changes and Mr. Cohen's abrasive style also hurt morale.

"I think you have to tread lightly before you decide everything's no good and has to be changed," said Harry Lazarus, who was vice president for London Fog's 100-plus outlet stores before leaving the company shortly after Mr. Cohen's arrival.

The tension manifested itself earlier this year when Mr. Cohen held an informal meeting in downtown Baltimore and told managers he would try to do a better job of listening to suggestions. The perception among managers was that Merrill Lynch had asked him to appease them, Mr. Millman said.

"Nobody believed it was coming from him," Mr. Millman said.

Not everyone thinks Mr. Cohen was wrong in trying to preserve higher prices on the company's London Fog brand. He was asking stores to hold off on discounts until a certain time in the selling season -- say, mid-December, merchants said.

That way, London Fog's profit margins would be higher and the line would gain increased entree to exclusive haberdasheries. It would also avoid competition with the lower-priced Towne brand.

"You want to maintain the integrity of the line," said David S. Leibowitz, a retail analyst and managing director of Burnham Securities Inc., a New York brokerage.

William Richins, London Fog's executive vice president and chief financial officer, said yesterday that the company won't alter its no-discount policy.

But retailers and analysts said they expect that John Varvatos, London Fog's new chairman, and James Milligan, its new chief executive, will cave in to some degree.

"If I was a betting man, I would say it will be modified," a buyer said.

"Most outerwear departments are more like Middle Eastern bazaars," with rapid price changes, "than department stores," Mr. Millstein said.

Howard Davidowitz, a prominent New York fashion consultant, believes London Fog has much more progress to make.

"London Fog is a business that is going to have to be reinvented. They're losing tremendous market share to all the private labels and everybody else. This is a company that's got to have new fashion and distribution channels."

Whatever London Fog's future, Arnold Cohen won't be part of it. He's not likely to lack for money, however.

The industry's standard severance package for somebody in his position, Mr. Millman said, is "upwards of $1 million."