Ralph Lauren Corp. has started shrinking its workforce.
Cuts to its staff — 5 percent of its head count, or at least 750 jobs — began around mid-May and are due to the company’s shift to a different operating model. The company expects it will take several months to complete the shift to the new model. For the fourth quarter ended March 28, the company had 25,000 employees, consisting of 15,000 full-time staffers and 10,000 part-time workers. About 15,000 are located in the U.S., with 10,000 located overseas. It was unclear as the shift continues toward completion how many more jobs would be affected. A number of the positions were cut due to redundancies in job responsibilities.
A spokesman for Ralph Lauren said, “Consistent with what was reported after our May earnings call, as part of Ralph Lauren Corp.’s new brand management structure to maximize growth and achieve meaningful operating and financial efficiencies, we are reducing our full-time workforce. Making these kinds of decisions is difficult but necessary, and our new structure will create a platform for profitable growth by allowing us to both improve our global brand equities and drive operating efficiency over time.”
The organizational changes at Ralph Lauren began earlier this year, in February, when the company said a new global brand management, operating model could yield $100 million in annualized savings once fully implemented. The model is premised on the idea of having a core management team focusing on one brand so there is a consistency in product and brand messaging across the entire line worldwide.
In April, the company named Christopher H. Peterson president, Global Brands, a new position that has all six global brand presidents now reporting to him. He reports to Ralph Lauren, chairman and chief executive officer.
There will be six brand groups: the Ralph Lauren luxury brands, excluding home, under the oversight of Valerie Hermann as brand president; Polo; Denim & Supply; Lauren, Chaps and American Living in the same group; Ralph Lauren Home, and Club Monaco.
Last month, Peterson said the company would incur restructuring and other one-time related charges of between $70 million to $100 million due to the reorganization, and that most of the charges would be weighted in the first half of fiscal 2016.
Peterson said the transition to the new model would enable the company to achieve “over $100 million of annual expense savings,” and that while a small amount would be realized in 2016, the savings would actually be in “fiscal 2017 and beyond.” He also said the new structure and processes “will enable a significant reduction in [stockkeeping units], which will lead to better inventory turns, better gross margins and SG&A cost savings.”
In the new structure, Jackwyn Nemerov continues as president and chief operating officer. Considered an expert on merchandising and product assortment, she reports to Ralph Lauren, and her range of oversight include wholesale, retail, e-commerce and licensing. Her employment agreement continues through April 1, 2017.
In the company’s latest quarterly result, net income for the fourth quarter ended March 28 fell 19 percent to $124 million, or $1.41 a diluted share, from $153 million, or $1.68, a year ago. Net revenues rose 1 percent to $1.89 billion from $1.87 billion. Results, in part, were hurt by a strengthening U.S. dollar and lower tourist traffic.
Rick Snyder, senior retail analyst at Maxim, said the changes to the operating structure should benefit the company. “Having fewer sku’s is very likely conducive to better working capital,” he said, adding that the “changes are all the right changes.”
Much of the new organizational structure is based on Peterson’s experience at Procter & Gamble Co., where he held several senior corporate and operational roles. There, Peterson worked on transforming businesses from market-driven organizations to global brands.