Digital Installation for the RL 50th Event – Photo: Ralph Lauren Corporation
Is Ralph Lauren positioned to accelerate its growth?
At Ralph Lauren Corporation’s Investor Day, CEO Patrice Louvet claimed that a four-year transformation has elevated the brand’s status, product and go-to-market strategy to serve as a foundation for accelerated growth.
The “Next Great Chapter: Accelerate” three-year plan calls for sales growth at a mid-to-high single digit pace through 2025, an acceleration from the low-to-mid-single digit pace under its previous five-year plan. The retailer expects the fastest growth from digital commerce, including third-party sites, up to the low-to-mid teens. That is followed by owned brick and mortar in the mid-single digits and then wholesale brick and mortar, low-to-mid single digits.
The plan builds on past success with three strategic drivers:
“Elevate and energize our lifestyle brand”: Mr. Louvet said four years ago “there were questions about our ability to appeal to the next generation.” However, making marketing investments and tapping data science for better targeting have helped strengthen “brand desirability, especially among the young generation.” A recent survey showed 74 percent of consumers perceive Ralph Lauren as a luxury brand, including 80 percent in the U.S. Over the past four years, AURs (average unit retail price) have increased 64 percent and 20 million new consumers, mostly younger ones, have shopped Ralph Lauren direct-to-consumer (DTC) channels.
“Drive the core and expand for more”: Core product — chinos, double-breasted blazers, cable-knit sweaters, polo shirts — are “powerful pillars” that have been expanded over the last four years, to 70 percent of Ralph Lauren’s mix. At the same time, the merchant is pursuing “high-potential, under-penetrated” categories, with outerwear, denim and sneakers showing healthy momentum. Women’s, only one-third of revenues, is seen to be a major opportunity.
“Win in key cities with our consumer ecosystem”: Go-to-market changes over the last four years significantly reduced “brand-dilutive distribution” and included exiting two-thirds of department store accounts and reducing off-price exposure by over 50 percent in North America. At the same time, DTC has expanded 600 basis points to 63 percent of revenue. Digital commerce has grown to 26 percent of sales. Ralph Lauren’s forward focus is on scaling its digital-first approach across the top 30 cities globally. Mr. Louvet said “taking direct ownership of the consumer experience” is critical with multi-channel shopping. He said, “We have to be agnostic about where inspiration and transactions take place.”
- Ralph Lauren Presents Its Updated Strategic Growth Plan, “Next Great Chapter: Accelerate,” And Long-Term Financial Outlook – Ralph Lauren
- Ralph Lauren 2022 Investor Day (webcast) – Ralph Lauren
- Ralph Lauren Accelerates, Sets Strategic Plan to Build on ‘Fortress Foundation’ – WWD
- Ralph Lauren Has an Ambitious New Look – The Wall Street Journal
- Ralph Lauren to Open 250 Stores Globally Over the Next 3 Years – Footwear News
- ‘Epic turnaround’ unfolds at Ralph Lauren – Crain’s New York
Discussion Questions
DISCUSSION QUESTIONS: What’s been the key to Ralph Lauren’s turnaround and how should it be looking to further capitalize on the progress? How confident are you that Ralph Lauren’s repositioning over the last four years has put the brand back in growth mode?
Poll
Loading …BrainTrust
David Spear
VP, Professional Services, Retail, NCR
Liza Amlani
Principal and Founder, Retail Strategy Group
The results at Ralph Lauren are encouraging. Management appears to have a solid understanding of the initiatives that are driving their good results and they are doubling down on these initiatives. As encouraging as this is, there is still plenty of uncertainty, especially in the fashion/apparel category, where consumers are especially fickle and the headwinds related to work-from-home still persist.
I worked in a licensed Ralph Lauren business many years ago. So I am thrilled to read this update. The fact that it is experiencing a growing perception of being a luxury brand, AND also having the powerful pillars comprise 70 percent of the business is an amazing one/two punch for both growth AND profitability.
Ralph Lauren is in a better position than it was five years ago. There is more discipline around the brand, although from our consumer data there is still some confusion about what Ralph Lauren stands for and where it is positioned in the market. Most of this arises from the fact that Ralph Lauren still has too much exposure to certain department stores which do not take care with the merchandising and display of its products. It needs to pull back on this, but to do so it needs to open more stores as RL has far too few of its own stores compared to other luxury brands. There are plans to do this, which are welcome and should help with the next phase of growth.
I’ve been a big fan of Ralph Lauren’s merchandise and it’s good to see their business in growth mode. The pandemic, work from home and a move to more casual, leisure-wear attire in offices has benefited RL in positive ways. Importantly, it appears their data science efforts are providing valuable insights, and senior leadership is quickly acting on these insights. They should continue to double down on DTC and exit even more department stores to bolster their growth plans.
Ralph Lauren’s management is delivering during difficult times and against expectations. Regardless of investing in stores or digital, they must continue to strengthen “brand desirability, especially among the young generation.” Reducing reliance on department stores is another strategic pillar to protect the brand and control its growth and margin trajectory.
Getting back to the fundamentals and restoring brand equity are critical elements of Ralph Lauren’s repositioning over the past several years. The latest developments demonstrate that Ralph Lauren is well on its way to accelerating the brand for growth over the next several quarters.
It’s critical for fashion retailers, particularly in the middle of the retail spectrum, to follow Ralph Lauren’s transformation plan by returning to the basics, driving the core and expanding for more, as well as owning the brand experience by driving strategies to win in critical cities within the consumer ecosystem. While Ralph Lauren continues to accelerate their growth, it will be essential for the brand to continue to drive excellence in execution across its merchandising, assortment planning, supply chain, sourcing, pricing, promotions, social media planning, and customer experience strategies.
Ralph Lauren is a brand that has not only gotten closer to its consumer, but has a clear understanding of what the consumer wants from the brand.
I worked with RL on and off for 20 years, from the shop floor at Harrods to Head of Buying of Lauren for Northern Europe and one thing was very clear.
The RL consumer is brand loyal and is engaged in every product category that Ralph Lauren has to offer. Iconic silhouettes, luxurious materials to personalized classics — > the RL consumer is ALL IN. From sheets to dishes to the navy blazer with gold buttons, Ralph Lauren is a brand that just gets better and better. Now that RL has a strategic DTC strategy, taking ownership of the brand and partnering with the right retail partners will help elevate the brand even more.