Patrice Louvet on Pushing Ralph Lauren Higher
Ralph Lauren Corp. is on a run — but the pony still has to keep ahead in a tricky retail landscape.
Under Patrice Louvet, president and chief executive officer, the American bastion of preppy has reached out and reached up — and the changes were clear in the company’s fourth-quarter earnings report on Thursday. Shares of the company jumped 5.4 percent to $114.01 on Thursday.
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Just over half Ralph Lauren’s operating profits came from its international businesses in the fiscal year just ended, a first for the company that lets it lean in on Asia and Europe when the U.S. is slowing. And average unit retail prices have risen 77 percent over the last five years, as Louvet has pushed the brand higher, tweaking both the styles on offer and where they’re sold.
Those are changes that have helped the company push through a topsy-turvy economy, in part by lessening its exposure to more value-centric shoppers who pull back in tougher times — like right now.
“There is a big question mark in many people’s minds: How is the consumer?” said Louvet in an interview with WWD. “Our consumer is resilient. This brand has pretty unique pricing power and the consumer is responding. Our higher [average unit retail price] is correlated with higher-value perception.”
So consumers are paying more, and feeling like they’re getting more as they turn to Ralph Lauren, which the CEO said is synonymous with the “quiet luxury” trend that’s taking fashion in a dressier direction after the pandemic-fueled athleisure binge.
“Hybrid is a good way to describe it,” Louvet said, noting shoppers are gravitating to relaxed classics that can go from work at home or the office to play, like Polo shirts, Oxford shirts and unstructured blazers
Some are getting more formal than that and the CEO said, “Ties are even back.”
For the moment, Ralph Lauren finds itself in something of a sweet spot — selling to people looking to spend — although it does still bend to the moment’s economic realities.
“We have become increasingly more cautious in North America around the trends that we’re seeing from the subset of our consumers who are more value consumers,” Louvet said.
That’s less of a concern than it would have been for the company in years past, but the company is still moving ahead cautiously.
Ralph Lauren’s fourth-quarter net income rose 32 percent to $32.2 million, or 48 cents a share, up from $24.4 million, or 34 cents, a year earlier. Adjusted earnings per share of 90 cents came in 30 cents ahead of the 60 cents analysts expected, according to FactSet.
Revenues for the three months ended April 1 increased 1.2 percent to $1.54 billion from $1.52 billion, a 9 percent boost in constant currencies.
For the first quarter, Ralph Lauren is looking for revenues to be flat to up slightly in constant currencies, building later on to a full-year increase in the low single digits on top of $6.4 billion in revenues last year.
On a conference call with Louvet, several analysts were bullish on the positive quarter, but Wall Street is also keeping watch and some analysts zeroed in on margins and sales in the year ahead.
Simeon Siegel, an analyst at BMO, said the company’s gross margins — at 61.7 percent of sales — came in below expectations with AUR growth being tempered by increased “input costs.”
“We continue to question Ralph Lauren’s weak gross margins vs. peers despite stated strong AUR,” Siegel said. “This needs understanding.”
And Zachary Warring, analyst at CFRA Research, said: “We expect the revenue trends in Q4 to continue in fiscal ‘24 with Asia returning to growth while North America continues to see a slowdown. We believe the company’s guidance is ambitious and we remain neutral on shares at these levels.”
Louvet is pushing ahead with a broader business that is better able to handle what the world throws at it.
While Ralph Lauren — like the other big fashion brands — has been focusing on its own stores, Louvet characterized the brand’s wholesale business as “solid” at both the Saks Fifth Avenue, Neiman Marcus and Bloomingdale’s of the world and the more midtier players like Macy’s and Dillard’s.
“What’s pretty clear is our wholesale partners are making choices between the winners and the losers and they’re investing with the winners,” he said. “We’ve been growing market share in that space over the long term in men’s, women’s and children’s.”
Ralph Lauren’s average unit retail prices in the North American wholesale business rose 8 percent in the fourth quarter.
The brand that found its start in the U.S. wholesale business is now much more.
Ralph Lauren, executive chairman and chief creative officer, said: “As I reflect on the past year, I am inspired by how our teams around the world brought the magic of our timeless vision to life. From our California Dreaming show to sponsoring some of the most iconic moments in sports — it’s their passion and optimism that inspire people to step into their dreams.”
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