Commentary

Gap's Larsson Takes Lauren CEO Role; Ralph Still Leads Creative

Stefan Larsson — widely lauded for the recent turn around at Old Navy — has been named CEO of the struggling Ralph Lauren Corp. Its 76-year-old founder will stay on board as executive chairman and chief creative officer and Larsson will report to him. 

“I’m excited about my business, and I’m not leaving,” Lauren tells the Wall Street Journal’s Ray A. Smith and Suzanne Kapner. “It’s a public company, and we have a responsibility to have the right leadership.” Larsson tells them that he and Lauren “connected in five minutes” after meeting over a dinner arranged by an executive recruiter. “Ralph surprised me by being so focused on growth.”

Lauren tells the AP’s Anne D’Innocenzio that Larsson  “understands what dreams are. In this business, it's about dreams because you are dreaming ahead and you're about progress and change and newness.”

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He also seems to have a keen eye for realities of the marketplace. Under Larsson’s leadership as global president, Old Navy, a division of Gap, has had three consecutive years of profitable growth and boosted sales by $1 billion, according to a Lauren release announcing the appointment. Before that, Larsson, 41, had been at Swedish retailer Hennes & Mauritz (H&M) for 15 years as “part of the team that grew sales from $3 billion to $17 billion and expanded the company’s operations from 12 to 44 countries.” 

“Using what he learned at H&M, he did a better job of matching supply and demand,” Morningstar analyst Bridget Weishaar tells the New York Times’ Rachel Abrams. “He realized that people who were buying cheap clothes still wanted to look good.”

At the Gap, Larsson “eschewed what he called the ‘clothes by the pound’ approach favored by many discount retailers,” Abrams writes. “Instead, he focused more on design, and on cutting down how long it took to get clothes from the design stage onto the shelves.” 

Ralph Lauren Corp.’s stock "jumped as much as 5.6% after the announcement — which was orchestrated with interviews with key fashion-beat journalists. Wall Street’s reaction "[underscores] the sentiment among investors that while Lauren is still the creative mind behind the iconic brand, a younger successor with turnaround credentials was needed to take on new challengers such as fast-fashion rivals and online merchants,” writes Bloomberg’s Lindsey Rupp.

“It’s really important to keep the core of the Ralph Lauren brand and all that it stands for, but also to freshen it up,” Talmage Advisors CEO Liz Dunn tells Rupp. “At Old Navy, Larsson ‘tried to get to the essence of what the brand meant to consumers and move from there — which probably is the right approach at Ralph Lauren, too.’”

There actually are about 25 brands within the company, “including Polo, Club Monaco and Denim & Supply, and the company makes clothing, accessories, furniture, home decor items and footwear under its labels,” Reuters  reports

“The retailer has reported three consecutive quarters of same-store sales declines, as currency swings and lackluster economic activity damped its results. Investors have sliced $7.5 billion off the market valuation of Ralph Lauren since the end of 2014, when the company was worth $16.3 billion,” Eric Platt reports for Financial Times.

Lauren — born Ralph Lifshitz in the Bronx — apparently has lost none of his verve for the creative end of the business even as he understands the need for improving operations. 

“Luxury is an exciting area,” he tells the AP’s D’Innocenzio. “Consumers want specialness. They want quality. There's a lot of mediocracy out there. And that's not selling. What's selling is specialness, quality and uniqueness. One of a kind.... and that's what I stand for.”

The company also announced that Jackwyn Nemerov, who has been No. 2 as president and COO, will retire in November and become an adviser. Lauren’s son David, a board member and EVP who has been considered a possible successor to his father, says in the release that Larsson’s “commitment and passion to build great brands will be invaluable as we move into the future.”

Gap says it is already searching for a new president and that Jill Stanton, its EVP of global product, will lead Old Navy on an interim basis, reporting to CEO Art Peck.

“The leadership shake-up sets up a tough challenge for Gap, which said earlier this year that it plans to use many of the techniques that Larsson implemented at Old Navy to revitalize its pricier brands,” writes Sarah Halzack for the Washington Post. At an investor meeting in June … Peck described Old Navy as  ‘proof point’ that the company is capable of creating better, more stylish clothes. Now, it will have to prove it can do that without him.”

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