Yes, Ralph Lauren has heard those rumblings about “will he or won’t he” retire.
But the designer gave every indication that he is still hard at work during Ralph Lauren Corp.’s Investor Day with Wall Street analysts at the New York Stock Exchange, during which the company outlined its strategy to get back on the growth track. That’s going to take a while, though, as company executives said the group doesn’t expect to return to top and bottom line growth until fiscal 2020 after being down in the low single digits in fiscal 2019.
The projection didn’t thrill Wall Street, which sent the fashion group’s shares down 1.25 percent to $137.86.
Ralph Lauren himself spoke at the meeting on Thursday about building his company and how he never thought he would be a fashion designer. He also told analysts the key to his success — and advice to others — is about how “sticking to your guns and believing in yourself is what it’s all about.”
Lauren said of president and chief executive officer Patrice Louvet: “You wonder what I feel about Patrice. He’s honest. He has integrity.…We’re partners; we’re solid. We’re friends. I have respect for him.”
The designer also noted how the company had changed and how there seemed to be hiccups every four to five years — and how the company “has lived through it all.”
“There have been good reviews and bad ones. Sometimes I want to cry. Other times I want to dance,” Lauren said.
But the designer pointed out that it doesn’t matter whether one is talking about fashion or restaurants, it’s still about style and taste. He also said, “The future is what you believe in, I believe in this company.”
As for retirement, Ralph Lauren said: “Is Ralph retiring? Is he hip with the times or not hip? I’m cool.”
And, as executive chairman and chief creative officer, he’s plenty busy with the company rolling out a five-year strategic growth plan, which was revealed at the meeting. The plan has five priorities: win over a new generation of customers, energize core products and accelerate underdeveloped categories, drive targeted expansion in its regions and channels, lead with digital across all activities and operate with discipline to fuel growth.
Lauren said, “With a clear plan, Patrice’s leadership and our dedicated, passionate teams all over the world, we are reigniting the entrepreneurial spirit that is at the heart of our heritage and culture.”
Louvet added that with a clear strategic plan in place, the company is confident it can return “to sustainable long-term growth and value creation.” He added that the company is putting the consumer back at the center of the business.
(On Thursday the company also said Linda Kozlowski, chief operating officer of Etsy, will join its board in August. She joins new board members Angela Ahrendts, also joining in August, and Mike George. Ahrendts is head of retail at Apple and George is ceo of Qurate.)
The strategic plan includes expansion in categories the firm sees as underrepresented in its current production line, including denim, wear-to-work, outerwear, footwear and accessories.
Louvet said that by 2023 international revenues, which represent 45 percent of the company’s top line, could eventually grow to 50 percent or higher. That growth would come through expansion in China and select European markets.
He also noted that there was healthy growth ahead for the company based on demographics.
The company is not focused on Baby Boomers. According to Louvet, 40 percent of customers are Gen X, and they make up the core base. There is also a high base of Millennial consumers, more male than female. About 30 percent of the company’s customer base in the U.S. is African-American or Hispanic/Latino.
Louvet said the company has the ability to “stretch generationally and across categories.”
Millennials are expected to represent 50 percent of the consumer market by 2023. China is also expected to provide 40 percent of the consumer base by then, whether they are shopping at home or abroad. And while digital sales are growing five to 10 times faster than stores, Louvet said stores will still play a key role in 80-plus percent of purchases.
Louvet also told investors that the company is also more keenly focused on the consumer. One profile is of a 26-year-old consumer who sees what she likes on Instagram, gets an e-mail, heads to the store to try on an item, and then decides to buy something else but only after she’s sent a selfie to friends to get their feedback. “We have to understand that path to purchase,” the ceo said, adding that the company is mapping out profiles for every consumer group.
“The consumer is critical to our success,” Louvet said. “The consumer is at the core of everything we do.”
By using the different profiles, and understanding where that growth will come from, the company is hoping to “recruit several million new consumers annually,” with a focus of growing the female Millennial, and at the same time growing share of wallet from existing consumers, including Gen Xers and Millennial men.
The company is also looking at growing its small format store base and its digital commerce. According to Louvet, the company is projecting at $500 million in incremental digital sales by fiscal year 2023 across the company web site, the department stores’ web sites, pure player e-commerce companies such as Tmall and Amazon, where it is testing its Chaps brand, and social commerce sites such as WeChat.
It plans to get to $1 billion in incremental sales over the next five years, helped by digital and through 50 percent growth in existing core categories plus 50 percent growth in the five underdeveloped categories. Additionally, the company plans to return $2.5 billion in cash to shareholders on a cumulative basis through share repurchases and dividend increases.
Senior level executives also provided presentations.
• Jonathan Bottomley, chief marketing officer, spoke about leverage the marketing and advertising investments, and working with new partners so that the $100 million spend is meaningful to the customer acquisition process. That includes targeted videos, social media and working with macro influencers for different consumer groups — think The Artist profile, the Star celebrity, the Aristocrat, the Rebel and so forth. Bottomley said it’s about “unleashing the power of culture and the power of the influencer.”
• Valérie Hermann, group president of global brands, spoke about the product categories, and how the company is driving excitement for the brand through limited editions and personalization. She said denim represents a $500 million opportunity for the company, or $100 million over each of the next five years. The company is looking at elevating the product offering through fit, wash, details and fabric technology and innovation. Lauren is also testing a new denim concept store and has converted 17 former Denim & Supply doors in the Asia-Pacific region.
• David Lauren, chief innovation officer, vice chairman and head of the Ralph Lauren Foundation, spoke about many of the firsts that the company has accomplished during its first 50 years — the concept of lifestyle, the concept of store environment, the introduction of QR codes and shoppable technology in the store — and what the company is doing to plant seeds for the next 50 years. He also spoke about wearables and how the company thought about its role in representing America on the global stage at the Winter Olympics this year. That experience is leading the company to plan for the incorporation of technology into its product, which will be upcoming for the fall season and for holiday. “This company is changing and evolving every day. This is a company of young ideas. We have everything we need to keep innovating and to keep experimenting,” Lauren said.
• Jeff Kuster, group president for North America, spoke about the U.S. business, which represents 52 percent of the company’s revenues. He also gave an example — Los Angeles — of how the company is balancing its store ecosystem through what he called “cohesive planning by market.” That’s about focusing on one market, and working on renovating a store, working on an outlet format and redoing the department store shop all at the same time to keep the message the same across all channels.
• Howard Smith, group president for international, spoke about the overseas markets. He said Japan was the first market where the company worked on balancing it store base through the small store format, and found it to be a productive strategy. The firm is also focusing on using local teams to tailor businesses accordingly. That’s now the strategy that serves as the go-ahead plan for China, where it plans to open 150 stores over the next five years, and Europe.
• Jane Hamilton Nielsen, chief financial officer, provided details about the company’s financials. She noted that while revenues are expected to be down in the low digits for fiscal year 2019, the company expects to get back to top line and bottom line growth in fiscal year 2020. She also told investors that the strategic plan is doable, that the plan allows for comparable sales growth and growth in gross margin dollars. She also said the company is open to the idea of “mergers and acquisitions opportunities to build our capabilities,” although lest anyone should get the wrong idea about what Ralph Lauren Corp. might acquire, she also emphasized, “We’re not an acquisitive company.”
Near the close of the presentations, Louvet emphasized the company’s focus on the consumer and how what the consumer wants will determine how the company pivots: “We got excited with wearables across this industry a few years ago…So we’ll follow the consumer…”