The fashion world has always been very attentive to being in the right place: the right party, the right place for the show, and most importantly, the right market.
Right now, the right market is luxury, and that’s where Ralph Lauren Corp. has headed.
And Patrice Louvet, chairman and chief executive officer, told WWD that the company’s ambition to be “the world’s leading luxury lifestyle company” paid dividends in the fiscal second quarter, when earnings fell but exceeded estimates and sales increased.
Driving that ambition 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 growth engines,” Louvet said. “We have this unique ability to lean into each other more in some areas of the strategy. Agility is really built into our overall plan. In terms of our products, we may relax the breadth of our portfolio this quarter to do more sports coats and fewer hoodies.”
All of the company’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 the pressure on the company’s outlets.
“We are on the offensive, we are focused on gaining share, recruiting new consumers,” Louvet said, noting that the company attracted 1.3 million new consumers in the last quarter.
Still, the end result couldn’t keep up with the go-go days seen a year ago.
Ralph Lauren’s net income fell to $150.2 million, or $2.18 per share, from $193.3 million, or $2.57, a year earlier. Adjusted earnings per share also fell, to $2.23 from $2.62 a year earlier, but better than the $2.08 analysts had targeted.
Shares of the company gained on a generally bullish day in the market, rising 4.1 percent to $93.95 in midday trading.
Revenue for the three months ended Oct. 1 rose 5 percent to $1.58 billion from $1.5 billion, up 13 percent in constant currencies.
In Asia, sales were up more than 30 percent in constant currencies, while Europe rose mid-decade and North America saw low-single-digit growth.
Gains in Asia stand out as many brands have struggled amid COVID-19 lockdowns in the market, forcing Ralph Lauren to close 35 per cent 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.
“In fact, we are excited about the opportunity in the short, medium and long term in China,” he said.
But China isn’t the end of the company’s strategy either, with the CEO saying Ralph Lauren has “a number of geographic growth opportunities” pointing to the US West Coast.
“The reason we just did our show there is not just dumb luck,” Louvet said, referring to the brand’s first West Coast show in the preppy Los Angeles suburb of San Marino, California last month.
As the brand has diversified, it has also steadily moved upwards, an evolution that maintains the philosophy of the founder.
“Our brand has always been built on optimism, inspiring dreams and a sense of possibility,” said Ralph Lauren, CEO and Chief Creative Officer. “For more than five decades, people around the world have connected with these ideas in powerful ways, trusting Ralph Lauren time and time again to deliver quality, timelessness and authenticity.”
Those fundamental traits have helped Ralph Lauren climb the fashion ladder, but Louvet called the higher prices a “result” of the company’s moves to rise, while the inputs include branding and supply. of products.
Average unit retail prices in the company’s direct-to-consumer network rose 18 percent in the quarter, on top of a 15 percent increase a year ago. Inflation undoubtedly explains some of that, and the company attributed the rest to “a compelling product offering and promotional discipline.”
“The consumer is seeing a differentiated proposal from us,” said Louvet.
While the CEO said that Ralph Lauren has historically been seen alongside “the HVPs and VFs of the world… We aspire to continue to elevate the company.”
“We are going to continue to make this a more luxury company,” he said. “That’s the journey we’re on.”
(Ralph Lauren isn’t alone on that journey, as others, like Michael Kors’ parent Carpi Holdings, have also been pushing luxury.)
While many fashion companies have significantly lowered their annual outlooks for this year due to the stress of soaring inflation, higher interest rates and the looming recession, Ralph Lauren is largely holding its ground.
The company continues to expect revenue to grow in the high single digits, although adjusted operating margins are forecast to be at the lower end of the previous range of 14 to 14.5 percent.
To hit those numbers, the company will have to navigate an increasingly competitive field with more world-weary shoppers and lots of inventory on the market.
“We’re seeing an environment where promotions start earlier and are more intense than they have been recently,” Louvet said. “That is not our game. We’re not going to launch into a promotional battle just to gain market share in the short term because it’s not the kind of market share we want to have because it’s not sustainable. I want them to come to the brand for what we stand for.”
To Louvet’s way of thinking, if holding the line leads to some bad quarters down the road, so be it.
So what is it that keeps the CEO up at night?
“People are still going to buy clothes, it’s not like the market is going to go to zero,” he said. “There are still great opportunities for increased engagement, 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 pretty well,” Louvet said.