By  on January 3, 2018

As Ralph Lauren Corp. prepares to celebrate its 50th anniversary this year, the company continues to make progress on its turnaround plan.Under chief executive officer Patrice Louvet, who joined from Procter & Gamble in July, China remains a top priority. The company looks to build its Chinese business, which represents the most significant geographic growth opportunity for the brand. Other major initiatives this year include further developing its new e-commerce platform; evolving the product; increasing the marketing spend significantly to tell the brand's story and appeal to a new generation of consumers, and growing its international presence.In its most recent quarter ended Sept. 30, Lauren posted net income of $143.8 million on net revenues of $1.66 billion. In disclosing second-quarter results in November, Louvet said the focus on driving “efficiencies” will continue through the rest of the [fiscal] year," and “we are on track to deliver our full-year targets.”Over the past two years, Lauren has elevated the brand in Asia and built a strong foundation there by improving quality of sales and overall profitability, Louvet told analysts during November’s call. Interestingly, only 13 percent of the company’s overall business is conducted in the region.In fiscal 2017, the company generated about $50 million of revenue in Mainland China, which represents less than 1 percent of company's total revenue, he said. Based on Millward Brown Vermeer data, Polo’s brand awareness in Mainland China is 83 percent. “This is a significantly higher figure than many of our competitors which have greater penetration than us in China. We will drive growth through both increased marketing and distribution, both online and with physical stores,” said Louvet in November.Among developments to expect in 2018? Lauren will continue to tailor social content to the Chinese consumer and dress many Chinese celebrities with social followings nearing one billion in total. In the brand’s second quarter, Lauren successfully launched on Tmall and JD.com and with social commerce on WeChat. Coinciding with these digital moves is an expansion of its fleet of physical stores in China. In November, Louvet said the company has opened 15 smaller-format stores year-to-date in Mainland China and by the end of fiscal 2018, expects to have 60 stores on the Mainland.Interestingly, there’s higher demand for more fashion-forward merchandise and a higher accessories penetration rate in China compared to other geographies. In taking into account Hong Kong, Macau and Taiwan, Lauren’s goal for Greater China is to reach almost $500 million in revenues in five years from about $170 million in fiscal 2017, driven by both comp growth and new distribution in China.Part of Ralph Lauren's North American problem has been the brand's heavy presence in outlet stores. In an effort to improve quality of sales and distribution at the company, Lauren has been reducing shipments to off-price channels and has also cut back wholesale distribution to department stores.[caption id="attachment_11043463" align="alignnone" width="640"] Ralph Lauren[/caption]Jane Hamilton Nielsen, chief financial officer, told analysts during November’s call that the group continues to execute the plan to return to profitable growth in North America — its most challenging market right now. Nielsen said she expects the wholesale business to end the fiscal year at the same range it was in the second quarter, which is down 22 percent. She said she looks for the clean-up to continue through the third and fourth quarters of the fiscal year. Global wholesale will be down in the midteens for the fiscal year.Among the moves the company has made to address weak underlying demand in the North American wholesale business is evolving the product and marketing, and investing in its wholesale store environments to improve the consumer experience. In North America, the company looks to refurbish its own store environments, beef up marketing, especially on the digital site, and do a better job telling its story in the U.S. While there's no plan in place for more store closures, the company expects to look at all distribution channels and every single store to assess their viability.As for product, Lauren has been focusing on its icons, renewing core items and aiming to inject excitement with seasonal twists and limited editions, which will continue. Last November the company introduced a digital-first, on-demand customization experience at its Prince Street store in Manhattan, allowing consumers to create their own Custom Crewneck Sweater. The sales figures were very promising and the company is looking into replicating it going forward.WWD reported in November that Lauren was restructuring its advertising department to put greater emphasis on digital. As a way to appeal to a new generation, the plan calls for digital-first campaigns with new ways to tell the company's story on the platforms that matter most to consumers.Lauren’s marketing spend was down in the first half of the fiscal year, “but it’s going to be up significantly in the second half, around double digits in the third quarter, but up significantly in the fourth quarter as we really believe marketing and telling our story is a great opportunity for us and a great opportunity to really get back to telling our story to position us for growth,” said Nielsen.In the directly operated e-commerce business, where comps were down 18 percent in the second quarter, the company has been aggressively reducing promotional activity to both ensure price coherence across its channels and enhance the overall brand and shopping experience for its digital consumers.Market experts believe Lauren is making the right moves.Asked whether he believes Ralph Lauren can successfully turn the business around, Gary Wassner, ceo of Hilldun Corp., said, “Yes, some brands are so strong, and they’ve just got a little bit diluted over the years. They need to recapture their essence, and I think Ralph and the company can do that. It’s one of the most valuable trademarks in the world. It’s a matter of redefining who they are for today’s consumer. It’s a very loved brand.”Allan Ellinger, cofounder and senior managing partner of Marketing Management Group, added, “I think it has the potential to turn around. Ralph’s smart, he’s surrounded by smart people. He might have to shrink it to go bigger. Look at what Coach did. These guys are public. They have to be able to swallow the bad medicine and focus on the long-term prospects instead of the short-term losses.”

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