Iconic apparel company Ralph Lauren has been in a years-long rut, delivering sinking profits and lackluster sales in a shopping environment that has been scrambled by the rise of fast-fashion and new e-commerce players.
On Tuesday, chief executive Stefan Larsson — a new hire who joined the retailer after turning Old Navy into a clothing powerhouse — unveiled to investors his sweeping plan for fixing the business. Larsson’s strategy calls for shakeups in virtually every corner of the nearly 50-year-old company: There are plans to shutter 50 underperforming stores, or about 10 percent of the fleet. The business will be restructured to save up to $220 million in annualized costs, and about 1,000 jobs will be eliminated.
Executives also will move to reduce the lead time it takes to produce clothing and to put more emphasis on three of the company’s sprawling line-up of fashion labels. And they’ll work to rein in bloated inventory, which has often resulted in full-price merchandise having to be funneled to its outlet stores and sold for less.
“Continuing with this vicious cycle is going to hurt the brand,” Larsson said at a meeting with investors.
Under its new plan, the Ralph Lauren company will put particular emphasis on evolving and shoring up three of its labels, including its eponymous high-end line; its casual men’s label, Polo Ralph Lauren; and a women’s line, Lauren Ralph Lauren. That means other parts of the business, including labels such as Polo Sport, Chaps, Denim & Supply and Club Monaco, as well as categories such as home furnishings and fragrance, won’t be a particularly big focus.
In the three core brands, the focus will be on getting the product right. Today, executives said, some 30 percent of items in its high-end line account for 70 percent of sales. Translation: There is a large of quantity of unproductive merchandise in its line-up, and it is going to work to trim the fat. And getting the product right will mean rethinking the supply chain, in part by working to trim their average lead time for producing clothes from 15 months to nine months.
The recent struggles at Ralph Lauren are deeply entwined with troubles in the department store category. Ralph Lauren depends heavily on those outlets for its sales, and the likes of Macy’s, Nordstrom and Kohl’s have each seen their sales take a serious hit in recent months. Larsson stressed that he’s still committed to selling through the retailers, even as the company looks for ways to tweak Ralph Lauren’s offering.
“On wholesale, I believe that wholesale will stand strong if you look five, 10 years ahead. What wholesale has to do as a channel is become more exciting,” Larsson said.
Larsson took the chief executive job late last year from the brand’s namesake, Ralph Lauren, the designer who continues to work at the company as its creative leader and chairman. Larsson came from Gap, where he had served as president of its Old Navy chain and was widely credited for spiffing up that brand by making it more fashion-forward, bringing to the clothing empire some of the production know-how he developed during an earlier stint as an executive at fast-fashion behemoth H&M.