Ralph Lauren’s turnaround efforts under new CEO Patrice Louvet got hit with the mallet of disheartened investors yesterday after it posted profit and revenue figures for 2Q 2019 that were better than analysts’ estimates -- but not good enough to sustain recent cries of “Buy!”
“Ralph Lauren has been making a comeback by refocusing on classic styles such as polo shirts, sweaters and peacoats, and unveiled its first streetwear collaboration last month, signaling its interest in winning over younger shoppers,” writes Kim Bhasin for Bloomberg. But she reports the company's shares fell as much as 5.2% after having risen “a hefty 32% this year through Monday’s close.”
“The upscale clothing label invested heavily in marketing during the quarter to celebrate its 50th anniversary, spending 30% more this year than last on marketing. Nevertheless, sales of its double-breasted blazers, striped ties, shoes and accessories rose just 1.6%, to $1.7 billion. In North America, same-store sales dropped 1%,” Lisa Fickenscher reports for the New York Post.
“The sales numbers are rather anemic and are characteristic of a brand that is still not entirely confident about its place in the fashion world or its future direction,” GlobalData Retail managing director Neil Saunders said, Bhasin reports.
Louvet, who had been group president of P&G’s global beauty unit, has been running Ralph Lauren since July, 2017. Former CEO Stefan Larsson quit in February 2017 “after just a year in his role, following differences with [executive chairman Ralph] Lauren over the direction in which to take the company’s product, marketing and shopping experience,” as Reuters’ Siddharth Cavale reported.
A few weeks ago, the company announced that it was “working with London skater label Palace in the American brand’s first streetwear partnership. Palace, known for its product ‘drops,’ where it launches a new collection without warning, and Ralph Lauren, famous for its traditional preppy-style Polo Ralph Lauren brand, announced the partnership via Instagram,” CNBC’s Lucy Handley reported at the time.
Writing for the Wall Street Journal’s “Heard on the Street” column, Elizabeth Winkler rues the 5.2% stock drop and says that “investors should be encouraged” because Ralph Lauren is “building momentum.”
“The company has focused on digital investments, including improving its site and e-commerce operations, as well as expanding its footprint in China, where it is underrepresented relative to its peers. It plans to open 50 stores these year, predominantly in mainland China,” she argues.
“That new focus may be thanks to the leadership of Mr. Louvet, who took the helm last year. Though no fashionista -- Mr. Louvet was previously Procter & Gamble ’s top beauty executive -- he has returned the company to basic principles: what does the consumer want? How is the consumer experiencing the brand?”
“Polo Ralph Lauren isn't the only fashion brand making [streetwear] partnerships in this vein. Louis Vuitton recently partnered with the wildly popular brand Supreme on a limited-edition line, and Fendi and Fila launched a limited line combining the two brands' logos,” Jessica Tyler observes for Business Insider.
“There's an emerging brand of luxury, built around the Gen Z and Millennial mindset, whereby luxury is no longer tethered just to price and perception. It feels like we're living in the age of the remix,” Brian Trunzo, senior consultant at WGSN's Mindset, tells her.
“I think it’s about acquisition of new customers and recruiting people into your brand. Streetwear brands definitely have a different audience, but this is a great way to maybe increase your awareness among a different set of consumers. In that way, these collaborations can be quite powerful,” Coye Nokes, a partner in OC&C Strategy Consultants, tells Tyler.
Then again, maybe this is what Ralph Lauren inadvertently has been doing for lo these many years, as Jian DeLeon argues in an essay for Highsnobiety that, among other example, cites the 2016 bookBury Me With The Lo On. (It’s $95 from the publisher; $595 and up on Amazon. But you can check out this video on YouTube for the lowdown.)
Here’s DeLeon’s lede: “A few years ago we made the case for why Ralph Lauren is arguably the greatest streetwear brand of all time. A lofty take, sure, but like many of the brands shoehorned into the ‘streetwear' umbrella these days -- it’s definitely not how the label would describe itself. But the focus on product that tells a story, represents a distinct visual universe, and has the ability to mean different things to different people -- that’s something Ralph Lauren pioneered, and a methodology many street fashion brands have tweaked to make their own.”
And now that it’s got a P&G guy pushing that story, there’s good reason to skate with the WSJ’s Winkler’s positive take on the matter.