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Ralph Lauren Corp. is back in growth mode and ready to move on.
There’s a new world to be won now that the coronavirus is waning in key markets.
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Patrice Louvet, president and chief executive officer, told WWD the company has reset during the pandemic — cutting costs, focusing in on its powerhouse namesake brand — and is ready to grow from a position of strength.
“The key elements are in place and now it’s about executing,” Louvet said, noting the company had a strong finish to a tough year with its fiscal fourth quarter.
Fiscal fourth-quarter revenues increased 1 percent to $1.29 billion from $1.27 billion a year earlier with a 52 percent jump in digital commerce.
Net losses for the quarter ended March 27 narrowed to $74.1 million, or $1.01 a share, from $249 million, or $3.38, a year earlier. Adjusted earnings per share tallied 38 cents.
The year-ago period included the first couple weeks of coronavirus lockdowns in the U.S. — the beginning of an especially harrowing year for the fashion industry and the world.
For the full year, Ralph Lauren’s revenues fell 28.6 percent to $4.4 billion while net losses tallied $121.1 million, compared with earnings of $384.3 million in 2019.
Investors are watchful.
Shares of the company fell 7.1 percent to $121.74 on Thursday, leaving the company with a market capitalization of $8.9 billion.
Camilla Yanushevsky, a stock analyst at CFRA Research, has a hold rating on the stock and said it is fairly valued.
Yanushevsky weighed the company’s “healthier balance sheet” against concerns around the brand’s focus on ready-to-wear, how quickly people will get back to work and the company’s wholesale/retail mix and exposure to Europe.
But like fashion in general, things are moving fast at the company.
Ralph Lauren was already on the move before the pandemic — focusing operations, connecting more digitally with consumers and working to push its main brand up to higher price points.
The company that is now charging into its new fiscal year has been reshaped more quickly and more dramatically than seemed likely headed into 2020.
Ralph Lauren moved Chaps to a fully licensed model, inked a deal to sell Club Monaco next month, exited more than 200 U.S. department stores, cut its off-price business and moved to reduce daigou sales on ralphlauren.com.
All together that is expected to cut just over $700 million in sales out of this year compared with last year — setting up sales that are roughly flat to prepandemic levels on an underlying level.
The resulting business is powered by the core brand and at higher prices. Average unit retail prices at the company have risen for 16 straight quarters and were up 26 percent last year alone.
Louvet pointed to the steady climb as a sign of brand strength that together with the new customers — the brand attracted 4 million fresh faces in its direct-to-consumer network last year — signals a positive trajectory for the next few years.
“We’ve really taken this time to reset,” the CEO said. “We’ve really laid the groundwork for sustainable, multiyear growth. Our [customers’] purchase intent has increased, our AUR has increased and what we’re seeing is our brand aesthetic is really anchored in these luxury classics, these kind of elevated clothes that you can live in.”
The brand is also working to fit into the lives of many kinds of consumers at once.
“We have a very solid base of existing consumers who we care deeply about and we want to continue to expand our portfolio with,” Louvet said.
But those 4 million newcomers to the brand are a particular focus.
“Typically these new consumers are higher basket size, higher profits from a gross margin standpoint and younger, so really an exciting profile,” Louvet said.
Ralph Lauren is also looking to grow geographically and by category — where the CEO pointed to room to expand in home goods, outerwear and sneakers — and digitally.
Now that the vaccine has freed many consumers to get back out again and shop, the company is looking to keep up the dramatic gains it’s seen online while driving growth with the in-store business.
“There’s this question mark around, ‘Can you grow both at a healthy clip?’” said Louvet, who added it is still early days, but that the company is encouraged by the progress so far.
And Ralph Lauren is still pushing.
“We have the fuel to invest in digital, to invest in marketing, to invest in new store operations,” Louvet said, adding that the company’s conservative approach with its balance sheet paid off in the crisis last year. Ralph Lauren ended the year with $2.8 billion in cash and investments as well as $1.6 billion in total debt on its books.
“We came out of it with plenty of firepower to invest in these growth vectors,” Louvet said. “We view our brand as bigger than our business.”
Indeed, the man himself sees the market coming his way.
Ralph Lauren, executive chairman and chief creative officer, said: “This has been a year of profound challenge and reflection — both for our company and for communities around the world. For us, it was a reminder of the importance of staying true to our core vision — anchored in the ideas of timelessness and authenticity — while embracing new ways of connecting with people. As we begin to heal from a year marked by pain and division, we believe the kind of luxury we stand for — one that is inclusive and marked by a spirit of togetherness, optimism and love — is what people are craving.”
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