Ralph Lauren's Revamp Plan Is Going Old School
If you liked those Ralph Lauren cotton board shorts stenciled to look like World War II duffel bags, you'd better rush out and buy a pair while you still can.
After three years of disappointing results, Ralph Lauren Corp. is doubling down on clothes that made the designer famous in the first place. That means a greater focus on such items as polo shirts, wool pants, double-breasted jackets, and navy blazers. Less so everything else.
In a two-hour presentation to analysts and investors on Tuesday, executives at the New York-based fashion company said they had neglected its strongest brands, fumbled on marketing, and failed to properly manage inventory. Now Ralph Lauren is closing more than 50 stores and eliminating 1,000 full-time corporate and retail jobs. The company has shed more than half its market value since 2013.
"Yes, did we drop the ball? Did we make some things wrong? Absolutely," said Lauren, the 76-year-old Bronx, N.Y., native who founded the label 49 years ago as a seller of neckties. "Am I happy about it? No."
Spearheading the revamp is Stefan Larsson, 41, a former executive from H&M and Old Navy who took over for Lauren as chief executive officer late last year. "We have all the cards," said Larsson. "But we need to play the cards in a different way."
Three brands will now take priority at Ralph Lauren: Polo, Lauren, and the namesake label. Executives used the word "iconic" dozens of times and spent almost 20 minutes flashing vintage photos of the designer and his family from the old days, just to drive the message home.
At Ralph Lauren, 30 percent of its styles make up 70 percent of the business, said Valerie Hermann, the retailer's global brand president for women's luxury. That number is even higher among luxury goods. The hottest top-end items are older clothes that continue to sell well. Unproductive styles make up 65 percent of its offerings. As a result, Ralph Lauren has cut them back by one-third over the past six months.
The changes mean Ralph Lauren will take a hit in the coming months. The company predicted a low double-digit drop in sales in fiscal 2017 as it gets rid of excess inventory, tweaks its merchandising strategy, and restructures the organization. Shares fell as much as 10 percent after the announcement.
Larsson, the first CEO who isn't Ralph Lauren himself, built his career selling cheap, disposable fashions. Now he's using that expertise to streamline Ralph Lauren and cut costs. Its eponymous founder will remain with the company as a top executive.
Ralph Lauren will still create new collections every season in search of future bestsellers, trying to find styles that can withstand shifting trends. Hermann singled out a few she hopes will catch on next spring, such as peacoats, nautical sweaters, and cargo pants. Then there are the more fashion-forward clothes that serve a different purpose—one Hermann said the retailer shouldn't jettison.
You need "some styles which are building brand equity, which are financially less productive but making you dream," said Hermann. "You come in the store because of that."