Ralph Lauren CEO Patrice Louvet Touts ‘Consistency’ as Profits Increase
The CEO told WWD, "We really want people to view Ralph Lauren as a company that you can count on."
Ralph Lauren Corp. had its moment in the spotlight at the Olympic opening ceremony in Paris, where the brand outfitted Team USA.
Now the company is having its moment on Wall Street, with first-quarter results that showed stronger profits and a mild increase in sales, with gains in Europe and Asia outweighing declines at home in North America.
Net income for the quarter expanded 27.6 percent to $168.6 million, or $2.61 a diluted share, from $132.1 million, or $1.96, a year earlier.
Adjusted earnings of $2.70 a share came in 23 cents ahead of the $2.47 analysts had penciled in for the company, according to Yahoo Finance. Even so, shares of the company slipped 3.4 percent to $159.39 on Wednesday.
In an interview with WWD, Patrice Louvet, president and chief executive officer, said the company is striving to be as steadfast as the brand built by Ralph Lauren, who is now executive chairman and chief creative officer.
“We have lunch every week when we’re in the office together and the topic that we consistently talk about is: are we being true to who we are?” Louvet said, drawing back the curtain on his back and forth with the company’s namesake.
“In this industry that is so volatile, that has a number of different trends that come and come, what I think characterizes Ralph Lauren and the man and the company for the past 57 years now, is this clarity, consistency of who we are, what we stand for, what matters to us,” Louvet said.
“Then, obviously, the challenge for us and the work is to make sure that we’re presenting it in a way that’s consistently fresh and engaging, particularly for the younger generations, but also true to who we are,” he said. “And so many brands in this industry lose their way because they follow a trend or they become very, very hot and then they just lose the sense of who they are and then the consumer is confused and, over time, less interested.”
Consistency can work for brands and for companies, as Wall Street, which abhors uncertainty, tends to reward buttoned up firms that are broad enough or have enough stretch to produce results even as the landscape changes.
“The macro environment is obviously on everyone’s mind,” Louvet said. “And in that context, I really want to reinforce that we have built an incredibly durable company and brand. And if you think about it in times of uncertainty as an investor, you want to invest in companies with strong brands and products, a great balance sheet, operational discipline, and proven agility. And that’s Ralph Lauren, durable, reliable, consistent. So we feel we’re very well positioned heading into the key holiday season.”
Revenues for the three months ended June 29 rose 1 percent to $1.51 billion from $1.5 billion. The top line was helped along by the 1.3 million new customers the brand added in the first quarter and by the 6 percent increase in average unit retail prices in the company’s direct-to-consumer business, the company said.
Revenues in North America fell 4 percent to $608 million, as wholesale continued to be a tough spot with a 13 percent decline impacted by the timing of Easter and fewer sales to offpricers.
In Europe, revenues were up 6 percent to $479 million, while Asia was ahead 4 percent.
Louvet highlighted the strength of Ralph Lauren’s DTC business, which represents 66 percent of the company’s sales and saw comparable sales increase by 5 percent in every region.
But wholesale remains in flux — as is the cause for brands across the fashion spectrum.
“What I’m excited about in our wholesale performance is we’re actually growing share in the key places where we play on men’s, on women’s and on children’s,” Louvet said, noting the brand is seeking to elevate at wholesale as well.
“That’s a combination of investing in top doors, continuing to prune the doors that we do not think are right for the brand long term,” he said. “So this quarter, this year, we said we’d shut down about 45 doors in North America and we had similar closures in the prior year. We will continue to work on the elevation of our wholesale presence. Wholesale, strategically, has a really important role to play in our ecosystem because it’s a wonderful place for brand discovery.”
It’s also a market that’s changing rapidly and most dramatically Hudson’s Bay Co.’s $2.65 billion to buy Neiman Marcus and combine it with Saks Fifth Avenue.
“We have great relationships with each of these partners and we’re really looking forward to what that combination of brands and capabilities will look like,” Louvet said. “There’s attractive upside opportunities as they come together.”
It’s a deal, though, that’s brought together some strange bedfellows with both Amazon and Salesforce helping fund the acquisition.
Asked about their involvement, Louvet said, “We’ll need to see how ultimately this plays out.”
While Ralph Lauren navigates the troubled wholesale scene in its home market, the brand continues to expand in China — which has grown to represent 8 percent of sales from about 3.5 percent before the pandemic. Sales in China were up in the high single digits for the quarter.
“By combining the activation of our global platform — think Wimbledon, think our fashion show — with work with local celebrities, local influencers, that is really driving that local relevancy,” Louvet said. “Domestic Chinese consumers are gravitating towards our core products, our icons. And that’s the bulk of the company’s business. Seventy percent of the company’s business is core, so consumers are leaning into our cable knit sweaters and our Polo bear sweaters, they’re leaning into our linen shirts and our linen suits. They’re leaning into our stretch mesh polos.”
At the same time, Chinese consumers are leaning away from many other fashion brands and goods, to the general dismay of the luxury industry.
For the full year, Ralph Lauren continues to see revenues rising in the low-single digits, on a constant currency basis.
“Our brand has always been about inspiring a better life and celebrating the moments that bring us together,” said Ralph Lauren, executive chairman and chief creative officer. “From our intimate runway show at our New York studio this spring to our elegant Salone del Mobile presentation in Milan and this summer’s Olympics, we are inviting people around the world to step into their dreams through authentic, timeless style.”
