Ralph Lauren’s Patrice Louvet on Luxury and the Year Ahead
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The fashion crowd has always been very attuned to being at the right place — the right party, the right show venue and, most importantly, the right market.
Right now the right market is luxury and that’s just where Ralph Lauren Corp. has been headed.
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And Patrice Louvet, president and chief executive officer, told WWD that the firm’s ambition to be “the leading luxury lifestyle company in the world” paid dividends in the fiscal second quarter — when earnings slipped, but topped estimates, and sales gained.
Pushing that ambition forward is the company’s recently revamped strategic plan, which Louvet touted as strong and diverse enough to move with the times and double down on product categories or regions that are hot.
“We have a clear game plan and we have multiple engines of growth,” Louvet said. “We have this unique ability to lean harder on some areas of the strategy. Agility is really built into our overall plan. On our product side, we can flex the breadth of our portfolio — this quarter to make more sports coats and fewer hoodies.”
All of the firm’s regions are growing on a constant currency basis, with continued strength in China despite COVID-19 lockdowns there. And the full-price business is offsetting pressure in the company’s outlets.
“We’re on offense, we’re focused on gaining share, on recruiting new consumers,” Louvet said, noting the company brought in 1.3 million new consumers in the past quarter.
Still, the bottom line couldn’t quite keep up with the go-go days seen a year ago.
Ralph Lauren’s net income slipped to $150.2 million, or $2.18 a share, from $193.3 million, or $2.57, a year earlier. Adjusted earnings per share also slipped, to $2.23 from $2.62 a year earlier, but were better than the $2.08 analysts had penciled in.
Shares of the company gained in a strong day for the market, rising 5.8 percent to $95.45.
Revenues for the three months ended Oct. 1 increased 5 percent to $1.58 billion from $1.5 billion, a rise of 13 percent in constant currencies.
In Asia, sales were up more than 30 percent in constant currencies, while Euope was up in the midteens and North America saw a low-single-digit increase.
The gains in Asia stand out as so many brands have had difficulty amid COVID-19 lockdowns in the market, which forced Ralph Lauren to close 35 percent of its stores in Greater China.
The overall landscape in China is also changing, with President Xi Jinping consolidating political power and setting a new tone at the top.
Louvet noted that Ralph Lauren has been in China for 40 years building deep connections there, with supply chain partners and consumers.
“We are indeed excited about the short, mid and long-term opportunity in China,” he said.
But China is also not the end-all, be-all of the company’s strategy and the CEO said Ralph Lauren has a “a number of geographic growth opportunities” pointing to the U.S. West Coast.
“The reason we just did our show there is not pure luck,” Louvet said, referring to the brand’s first West Coast runway show in the preppy Los Angeles suburb of San Marino, California, last month.
As the brand has branched out, it’s also steadily moved up — an evolution keeping with the founder’s philosophy.
“Our brand has always been rooted in optimism, inspiring dreams and a sense of possibility,” said Ralph Lauren, executive chairman and chief creative officer. “For more than five decades, people all over the world have connected to these ideas in powerful ways — trusting Ralph Lauren time and again to deliver quality, timelessness and authenticity.”
Those foundational traits have helped Ralph Lauren move up the fashion ladder, but Louvet called higher prices an “output” of the company’s moves to elevate, while the inputs include brand building and product offering.
Average unit retail prices in the company’s direct-to-consumer network rose 18 percent in the quarter, on top of the 15 percent boost a year ago. Inflation, no doubt, accounts for some of that, and the company put the rest of it down to “a compelling product offering and promotional discipline.”
“The consumer is seeing a differentiated proposition from us,” Louvet said.
While the CEO said Ralph Lauren has historically been seen alongside “the PVHs and the VFs of the world….We aspire to continue to elevate the company.”
“We’re going to continue to make this more of a luxury company,” he said. “That’s the journey we’re on.”
(Ralph Lauren is not alone in that journey as others, such as Michael Kors parent Carpi Holdings, have also been pushing toward luxury.)
While many fashion companies have significantly reduced their annual outlooks for this year given the stresses of sky-high inflation, higher interest rates and looming recession, Ralph Lauren is largely holding its ground.
The company continues to expect its revenues to increase by high-single digits, although adjusted operating margins are seen coming in at the low end of the prior range of 14 to 14.5 percent.
To hit those numbers, the firm will have to navigate an increasingly competitive field with more world-weary shoppers and a lot of inventory in the marketplace.
“We’re seeing an environment where promotions are starting earlier and they’re heavier than they have been recently,” Louvet said. “That is not our game. We will not jump into a promotional battle just to gain short-term market share because it’s not the kind of share we want to have because it’s not sustainable. I want them to come to the brand because of what we stand for.”
By Louvet’s way of thinking, if holding the line leads to a few bad quarters along the way, so be it.
So what does keep the CEO up at night?
“People are still going to buy clothes, it’s not like the market’s going to go to zero,” he said. “There are still such great share gain opportunities, so how do we drive brand desirability and continue to elevate that? How do we make sure we stay agile with our investments, with our inventory, with our overall resources?
“I sleep quite well,” Louvet said.
