Ralph Lauren shines bright in Asia, only
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Ralph Lauren has reported another decline in net sales, but the overall results confirm the company is headed in the right direction, albeit slowly.
The company says its fourth-quarter sales decreased by 2.3 per cent to US$1.5 billion on a reported basis and were down 7 per cent in constant currency, driven by initiatives to increase quality of sales, reduce promotional activity, and elevate our distribution, as well as brand exits and lower consumer demand.
But that is an improvement on the full-year Ralph Lauren sales figures of a 7 per cent decline to $6.2 billion on a reported basis and 8 per cent in constant currency.
Fourth-quarter sales in Asia rose by 17 per cent to $257 million on a reported basis and by 11 per cent in constant currency, driven by strength in both retail and wholesale channels. Same-store sales were up 4 per cent.
That’s significantly better than the full-year figure of 6 per cent on both a reported and constant currency basis to $934 million.
Ralph Lauren’s big problem is the North American market, where sales continue to fall – in the last quarter, by 13.9 per cent, a greater rate than the 11.4 per cent of the same period a year ago.
“That’s significantly better than the full-year figure of 6 per cent on both a reported and constant currency basis to $934 million.”
Some of this decline was deliberately engineered as Ralph Lauren reduced sales through wholesale channels that it believes damage its brand.
“We applaud this corrective effort, though we think there is still much further to go.
Stores like Macy’s still stock and sell Ralph Lauren product, and merchandising and general retail standards fall short of what the brand should be aiming for. While we do not think it is necessary for Ralph Lauren to withdraw from a retailer like Macy’s, we do think that it should work more closely with the buying and store teams there to create an elevated in-store experience. Until it does, the inconsistency between what Ralph Lauren wants its brand to be and the reality on the ground will remain.”
Ralph Lauren is now more operationally stable. The partnership between Ralph Lauren himself and Patrice Louvet appears to be working well, and there is a sense that the company is serious about resolving its various issues. We are also encouraged by the appointment of Angela Ahrendts (former CEO of Burberry and current head of Apple’s retail business) and Mike George to the board.
George’s expertise in e-commerce will be valuable as this is an area where Ralph Lauren seriously underperforms. and Ahrendts’ experience in luxury and her ability to create coherent retail brands and propositions will be extremely beneficial to Ralph Lauren.
Overall, while we believe Ralph Lauren is a long way from full health, it is most certainly recovering nicely.
Questions & Answers
Q.Which market is causing the most significant sales decline for Ralph Lauren?
Which market is causing the most significant sales decline for Ralph Lauren?
The North American market is Ralph Lauren's biggest problem, with sales falling by 13.9 per cent in the last quarter. This is a higher decline than the 11.4 per cent seen in the same period last year.
Q.What is the company's strategy for improving sales quality and brand image?
What is the company's strategy for improving sales quality and brand image?
Ralph Lauren is intentionally reducing promotional activity and elevating its distribution, including reducing sales through wholesale channels it believes damage its brand. They aim to increase the quality of sales.
Q.How are Ralph Lauren's sales performing in Asia compared to the overall company figures?
How are Ralph Lauren's sales performing in Asia compared to the overall company figures?
Fourth-quarter sales in Asia rose significantly by 17 per cent, or 11 per cent in constant currency, to $257 million. This contrasts with an overall net sales decline of 2.3 per cent for the company.
Q.What specific expertise do the new board appointments bring to Ralph Lauren?
What specific expertise do the new board appointments bring to Ralph Lauren?
Angela Ahrendts brings experience in luxury and creating coherent retail brands. Mike George offers expertise in e-commerce, an area where Ralph Lauren is currently underperforming significantly.
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