However, the choice disappointed the City, with analysts saying Mr Coleman was not the "big hitter" required to address House of Fraser's difficulties. The shares slumped 14p to 175p - below the 180p issue price when the company came to the stock market two years ago - as the City began to discount the possibility of House of Fraser becoming a takeover target.
Some analysts said Mr Coleman's appointment appeared to strengthen the position of Brian McGowan, the group's non-executive chairman, who pledged to stay on yesterday in spite of the company's poor performance under his stewardship.
Robert Snaith, stores analyst at Societe Generale Strauss Turnbull, said: "Worthy though John Coleman is, he is not the `big hitter' many were hoping for. It is a chain with a lot of difficulties to put right and it has no genuine flagship store to carry it through the bad times."
Tony Shiret, at BZW, said: "The share price had moved up in anticipation of a bit more than this. He will have his work cut out to live up to the expectations of the market."
The share price rise had been fuelled by a mixture of takeover speculation and rumours that David Dworkin, the American retailer who led the revival of Storehouse, was in line for the top job.
Mr McGowan defended the appointment though he stopped short of saying that Mr Coleman was first choice. "No one turned me down. I probably saw eight people and John came out as easily the best. He was also available immediately."
Mr Coleman, 43, will be paid a salary of pounds 300,000 plus a performance- related bonus. He will also be eligible for share options worth four times the level of his salary and has a one-year rolling contract. He takes over from Andrew Jennings, who was ousted from the managing director's position last month after a series of profits warnings.
Mr Coleman said he was looking forward to the challenge of turning round one of the worst-performing retailers on the stock market. "Obviously I'm very excited. Of course there are problems but the brands are strong and so is the team here."
He declined to be drawn on strategy but said he would be conducting an immediate review when he joins the company on 29 April.
Mr Coleman has been keen to return to the high street since his departure from Texas Homecare, following its takeover by Sainsbury last year. He joined forces with the Barry Dale consortium that tried unsuccessfully to take over Littlewoods earlier this year.