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Nobody does it like Ralph Lauren.

Take the brand’s recent runway show in Los Angeles, which unofficially kicked off Hollywood’s autumn social season. In many ways, it set an industry standard for these types of glitzy, pricey-to-stage events.

Unique location? Check. The Huntington, an expansive property that includes sweeping immaculate gardens, helped set an enchanting scene. Big stars? Check. There were dozens of generation-spanning celebrities in attendance, from newlyweds Jennifer Lopez and Ben Affleck to TikTok’s Noah Beck. Hospitality? Check. At the post-show dinner, top clients had an opportunity to steal a photo with Ralph Lauren himself, who was dressed in the most perfect look of the evening — having swiped his go-to blue jeans for an all-cream getup.

But the runway? That felt different. Instead of showcasing a traditional designer collection, the 120-plus looks were segmented into sub-brands. There was the requisite men’s and women’s formalwear, but also artfully worn denim from Double RL, classic polos from, yes, Polo, and even children in cable knit sweaters and calico floral dresses.

“Ralph often says he doesn’t like fashion — or it’s more about style and elegance and timelessness,” Patrice Louvet, the company’s CEO, said in an interview that took place at the Hotel Bel Air across town, just a few hours before the event.

A lavish, star-studded runway show is certainly one expensive way to draw attention to a label that sells clothes ranging from a $100-something shirt to a $7,500 evening gown. Events like this can cost well into the millions of dollars, accounting for the staging itself to the gathering of talent. (While Louvet said that the company does not pay celebrities outright to attend events, they are sometimes paid to create content.)

It’s a luxury few brands can afford, especially publicly traded ones like Ralph Lauren that generate most of their sales from products closer to the $100-shirt end of the range. But Louvet noted that the company has in fact increased its marketing spend, committing to allocating 6.5 to 7 percent of its budget to these sorts of projects, up from around 4 percent pre-pandemic.

“When done in a modern light,” he said, “it continues to be the type of activity that spikes the most brand interest.”

To some degree, Ralph Lauren and competitors like Michael Kors and Coach — no strangers to lavish, star-studded fashion shows themselves — are all chasing the same goal: compete against the European luxury heavyweights not only in terms of sales growth and margins, but brand affinity, too.

Ralph Lauren has a key advantage over its American rivals: 55 years of precise, unwavering brand-building efforts to draw upon, thanks to the still-active Lauren’s devotion to his East Coast-elite-meets-European-aristocracy aesthetic. Ralph Lauren is a uniquely genuine lifestyle brand, giving it license to convincingly sell goods across a spectrum of categories and prices, from $72 flannel pajamas to $25,785 tufted leather sofas. It even operates one of the most successful restaurants in New York City, the Polo Bar, a concept it’s expanding into different markets.

Under Louvet, a Procter & Gamble veteran who was appointed CEO in 2017, Ralph Lauren has cut costs, raised prices and moved away from obvious discounting with the intention of cementing the label’s status as a luxury brand. (Internal surveys show that globally, 74 percent of consumers view Ralph Lauren that way.) In the past four years, the company has acquired some 20 million new customers, many from segments of the population — geographically, ethnically and gender-wise — that it might not have engaged with in the past.

Another sign of brand “elevation,” as Louvet likes to call it: gross margin in the 2022 fiscal year was 63.3 percent, up from 59.4 percent in 2018. The average selling price of products sold through Ralph Lauren has increased for 22 consecutive quarters.

“What excites me the most,” Louvet said, “is that a 60-year-old can wear a white polo shirt and feel cool in it. A 40-year-old can wear a white polo shirt and cool in it. And an 18-year-old can wear a white polo shirt and feel cool in it.”

The next phase, according to Louvet, is to ramp up sales, which at $6.2 billion, are roughly flat compared with 2018. That means driving those new customers to buy more “core” products like the polo and cable knit sweater — such items make up 70 percent of revenue — and sharply targeting niches of customers by region and tastes.

Louvet also wants to continue trekking upmarket through marketing spectacles like the LA show, but also by increasing sales of higher-end products, including designer fashion and leather goods, in order to directly compete with Europe’s biggest luxury players.

It already matches them in size. Now, it wants the prestige, too.

“Ralph was actually telling me recently that the first tie [he launched] was twice the price of a Christian Dior tie.”

The (Actual) Way Forward

Five years ago, Ralph Lauren felt a lot dustier. Stefan Larsson, a rising-star retail executive who’d made a name for himself at Old Navy, and before that, H&M, was ousted after butting heads with Lauren, who still holds a firm grip on the business — and 85 percent of voting rights on the public company’s board of directors. Louvet has fared better. While his strategy doesn’t vary wildly from Larsson’s — famously called “The Way Forward” plan — his background as a brand manager seems to be a better fit internally.

Much of Ralph Lauren’s success — but also its challenges — can be attributed to the control Lauren, 83, continues to exercise. What Louvet has managed to do is to allow Lauren that ultimate control over the look and feel of the Ralph Lauren world, while advancing the marketing and products in subtle, but still noticeable, ways, and transforming the operations to be run less like a traditional 7th Avenue retailer.

Much of the work is still in progress. For one, while the company has managed to reduce its reliance on end-of-season sales, it still has an outsized presence in the off-price market, which, if not managed properly, can easily erode that glowing brand perception.

Louvet said the company has reduced off-price revenue by 50 percent since 2018. He is adamant that the channel be used for its original purpose, to offload merchandising misses rather than sell a high volume of cheaply made, low-margin products. It’s the way many luxury brands handle the off-price.

“I don’t want you to find Ralph Lauren on a regular basis at Marshalls or T.J. Maxx,” he said. “When you have misses, off-price is actually a good way to manage it. So that pink shirt with the paint splattered blue on it that you thought was going to be really cool and it’s actually a dud? Off-price is a nice way for us to flush it out.”

The company also continues move more of its sales direct-to-consumer, taking another page from the luxury playbook. However, some analysts question whether the purposeful shift away from wholesale — with the opening of 450 new stores over the past four years — will allow Ralph Lauren to keep profits up. While gross margin continues to steadily climb, operating margin can be more difficult to manage. BMO Capital Markets analyst Simeon Siegel cites Nike’s recent challenges as a warning.

“Not every company has a path to growth,” Siegel said. “Recognising that they want to focus on health, should Ralph be $10 billion a year in sales? If it is, what happens to total profitability?”

New Luxury

Keeping off-price in check and putting a lid on spending is one thing. Actually competing head-on with European luxury brands is another challenge entirely. Ralph Lauren’s heritage may go back decades, but some of its competitors go back centuries. They’ve had longer to build up their mythos and erase the reality of their modest past. They also don’t primarily sell $110 polo shirts.

Louvet argues that the definition of luxury has changed, and is not confined to price point.

“A $4,000 handbag is a 20th century definition of luxury,” he said. “This brand has always been very democratic. I think it’s one of the things that sets us apart.”

That said, there is certainly an aim to increase sales at the high end, where margins are often wider. The company’s runway collection, which includes formalwear, as well as novelty items like cashmere teddy bear sweaters, still only accounts for a small percentage of revenue — one source close to the company said that the women’s runway collection generates about $80 million a year, which would be less than one percent of overall sales.

Louvet would only confirm that it is “not the largest part of our business,” and that the company has “ambitious plans” to aggressively grow it over this next phase “at a disproportionate rate versus the rest of the portfolio,” even if it will never come close to Polo in size.

Of course, some luxury houses have diminutive apparel businesses — using the runway as a halo — but in those cases, high-priced leather goods are strong. Ralph Lauren has struggled to cement itself in that category.

However, Louvet said that the focus is first on expanding the women’s designer apparel business. Unlike most fashion brands, Ralph Lauren still sells more men’s clothing than women’s — the split is about 70-30 — despite the fact that more than half of its customers (56 percent) are women.

“It’s not like we have to tell her to come into our store, or on to our website. She’s actually there,” he said. “What we’re realising is, both in apparel and in leather goods, we have an immense opportunity.”

A Tempting Target

Still, it’s not surprising to analysts and industry insiders alike that the company is often the subject of takeover chatter: most recently, in a report that suggested LVMH was interested in acquiring the brand.

“Part of the magic of Ralph is being able to inspire, but they’re doing it for the masses,” Siegel said. “It’s much easier to be special and unique when you’re only looking for a much smaller subset.”

While LVMH currently has its hands full overhauling another American company, Tiffany, and it’s unlikely Lauren, the person, would sell the business while he is still in control, Ralph Lauren remains one of the most attractive targets, simply because of its global reach. If Louvet manages to move it further into high luxury, then the likelihood it will some day end up in the portfolio of a strategic group could increase.

However, Louvet was clear about the company’s current position.

“Often, you want to be absorbed by a group like that because you don’t have the resources to support your strategy. But we have the scale and the resources to support our strategy,” he said. “I’m sure these rumours will pop up again one day. It’ll be the Kering rumour and maybe one day it’ll be the Richemont rumour. But we’re super clear at this point. We’re feeling really good about where we stand and we have the resources to deliver what we need to do. But we’re very honoured to be considered.”