Ralph Lauren Going on the Offensive
Patrice Louvet is changing his game at Ralph Lauren Corp. and going into expansion mode after nearly a year and a half of realigning the company to COVID-19 consumer realities.
“The reset work is largely complete,” Louvet, who is president and chief executive officer, told WWD in an interview. “Ralph Lauren is back on the offensive.”
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The company is seeing some supply chain disruptions from the pandemic and is braced for any new surge, but otherwise is looking forward — and through the lens of big top and bottom line gains in the fiscal first quarter.
Ralph Lauren was already reinventing when COVID-19 hit and the company was able to supercharge that effort in a year of turmoil.
The result is particularly clear in the brand positioning — Ralph Lauren’s average unit retail prices rose 17 percent in the quarter for the 17th consecutive quarter of price gains.
“The brand evolution journey is now punching through to wholesalers,” Louvet said. “It started in [the direct-to-consumer business]. It’s now punching through into wholesale.”
Average unit retail prices through the brand’s North American wholesale accounts are up more than 20 percent compared with pre-COVID-19 prices.
“[We’re] feeling very good to see all the work that’s being done in d-to-c to elevate the brand is also translating into wholesale,” he said.
That wholesale presence is also much changed as the company has cut 66 percent of the North American brick-and-mortar doors it sold to just four years ago.
And that’s one of a series of changes that has boosted the brand.
Ralph Lauren has moved its prices up with a four-pronged approach that has it pulling back on promotions, strategically tweaking prices where the consumers are seeing value, boosting higher AUR categories like home and outerwear and focusing on channels and geographies that can accept higher prices.
Louvet said the work of elevating a brand is never done and that Ralph Lauren would keep pushing higher, although price expansion will moderate to low- to mid-single-digit growth.
Ralph Lauren isn’t the only company pushing to raise prices and cut down on promotional sales.
Last week, John Idol, who is chairman and CEO of Capri Holdings, sought make a clear break with price cuts.
“We raised prices on Michael Kors and we raised prices again for the spring season next year,” Idol said. “So, its prices are going to go up considerably. And also in Jimmy Choo. So, we’re going in the opposite direction and I hope I can kind of close the door on that conversation [on promotional activity].”
For years, the fashion industry relied on price cuts to drive sales. And while the strategy worked, it also stressed brands and hurt profit margins. Companies that can are now following the lead of the luxury market and moving higher.
Certainly for Ralph Lauren, higher prices are working.
The company’s sales for the first quarter ended June 26 jumped 182 percent to $1.4 billion, with strength in North America and Europe and a big bounce back from COVID-19 lockdowns a year ago.
The brand’s global e-commerce sales accelerated with better than 80 percent growth globally, with sales in its owned e-commerce channels gaining more than 45 percent.
Net income tallied $164.7 million for the quarter and compared with losses of $127.7 million a year earlier. Adjusted earnings per share of $2.29 — which exclude restructuring charges — came in well ahead of the 86 cents Wall Street analysts projected.
For the full year, the company expects revenues to rise by 25 percent to 30 percent in constant currencies with its gross margin increasing by 50 to 70 basis points, up from the 40 to 60 basis point decline previously projected. Stronger average unit prices and a favorable product mix are expected to more than offset higher freight costs.
All in, Louvet described the financial report as, “A clean beat and raise with eyes wide open on the uncertainty and the risk in the market.”
Investors liked what they saw and sent shares of Ralph Lauren up 6.3 percent to $125.45 on Tuesday.
For the immediate future, the general tenor of the retail world seems to be changing, and not necessarily for the better, but Louvet said Ralph Lauren is prepared to handle any COVID-19 increases caused by the Delta variant.
Ralph Lauren — and really the rest of retail — has a COVID-19 playbook to turn to now, unlike last year when the lockdowns in March sent brands scrambling to keep key parts of their businesses open while their stores and offices were closed.
“We now have much better tools and organizational experience dealing with these regular waves,” the CEO said. “Think about the capabilities that we’ve built over the last 18 months — connected retail, that’s a big unlock for consumers to access our brands.”
He pointed to online chat functionality, virtual styling and a ramped up digital business as well as established safety protocols for physical spaces.
That experience and knowledge that, even if consumers do have to retreat to their homes, the business can continue to push forward helps give Louvet a little more space to look further ahead.
“Our lens is beyond this quarter,” he said.
And Ralph Lauren, chairman and chief creative officer, said the brand is well positioned for that future.
“Quality, a sense of timelessness and a feeling of optimism inspire everything we create,” Lauren said. “I cannot think of a time when these values have felt more essential or relevant as the world looks forward to a future marked by hope and possibility.”
Dominique Maitre/WWD/Shutterstoc
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