Ralph Lauren Corp. aims to go back to its core.
As the fashion firm reported fourth-quarter results that beat Wall Street’s consensus estimates, new president and chief executive officer Stefan Larsson told Wall Street analysts that, following a comprehensive review, “we have gained a very clear understanding of the underlying drivers of the current performance and we now have a detailed view of what’s driving the downward trend. In short, we have not focused enough on the core of what made up great in product, marketing and the shopping experience.”
He added that the company has an “inefficient cost structure and organization that’s not nimble enough in the marketplace. What made us great was a crystal clear focus on owning classic, iconic styles and putting an effortless twist to it to make it current and desirable.”
Larsson spoke about becoming more true to the company’s core focused assortment, as well as “evolve the way we twist it so it becomes more desirable for the shopping experience to better reflect the aspirational lifestyle people dream of today.”
The company now aims to “leverage our brand vision into a much stronger consumer offering,” Larsson said. An important part of getting back to high performance is strengthening the group’s leadership team, such as “recruiting new talent and challenging our top performers with expanded roles.”
An example is the recent promotion of Valerie Hermann, a two-year veteran, Larsson said, who “has started to build a foundation that will strengthen our luxury business….She’s built a track record of strengthening brands and driving high performance and luxury. She has unique experience working to commercialize design and drive profitable growth.” In her role as global brand president, Hermann has oversight for all luxury brands as well as women’s Polo, Lauren, Chaps, Denim & Supply and all women’s and men’s footwear, accessories and denim Prior to joining Ralph Lauren, Hermann was with Yves Saint Laurent, John Galliano, Dior and Reed Krakoff.
Larsson added: “We have significant opportunity to further reduce costs and reinvest some of those savings and engines that will drive brand strength and profitable sales growth.” He also touched upon “simplicity and focus” on the call, and will likely expand on that when he details the group’s new strategy on June 7 at the company’s investor day. That is when the company will also provide its outlook for the first quarter and full-year fiscal 2017.
Ralph Lauren plans to have a new e-commerce platform later in fiscal 2017, which is expected to enable the company to better engage with customers digitally and across its retail channels. At the same time the firm continues to push on expanding its direct engagement with shoppers, it will work with its wholesale customers to improve that business.
For the three months ended April 2, net income was $41 million, or 49 cents a diluted share, compared with net income of $124 million, or $1.41 a year ago. Excluding certain charges in connection with the company’s global brand reorganization, net income was $74 million, or 88 cents a diluted share.
Net revenues slipped 0.7 percent to $1.87 billion from $1.89 billion. The fourth quarter included an extra week that contributed about $70 million of sales primarily within the retail segment, the company said. Wholesale net sales declined 6.5 percent to $942 million, while retail net sales rose 5.7 percent to $889 million.
Comparable-store sales fell 6 percent during the quarter, and were down 5 percent in constant currency. The balance of revenues was from licensing income. The company said growth in the quarter was from new store expansion and e-commerce.
The company beat Wall Street’s earnings per share expectations of 83 cents by 5 cents, and was slightly above analysts’ consensus revenue estimates of $1.86 billion.
For the year, net income was down 43.6 percent to $396 million on a 2.8 percent decrease in total revenues to $7.41 billion.
Ralph Lauren, executive chairman and chief creative officer, said, “Fiscal 2016 was a year of significant change for our company as we established a new organizational structure and appointed a new chief executive officer.”
The chairman added that he was “greatly encouraged by the changes that have already taken shape over the past several months under Stefan’s leadership and he has my full support as he and his team build and implement our new strategic growth plan.”
Larsson said, “We are confident that our new strategic plan will strengthen the brand, drive sustainable profitable sales growth and deliver shareholder value.”
The company said it ended the year with 493 directly operated stores, which includes 144 Ralph Lauren stores, 77 Club Monaco stores and 272 Polo factory stores. It also operated 583 concession shop locations worldwide at the end of the year. International licensing partners operated 93 Ralph Lauren stores and 42 dedicated shops, as well as 133 Club Monaco stores and shops at the end of fiscal 2016.
Shares of Ralph Lauren on Thursday rose 2.8 percent to $86.88