Patrice Louvet is close to unveiling his imprint on the “Way Forward” plan for Ralph Lauren Corp.
The president and chief executive officer for the past year has been getting his sea legs since joining the company last July, first looking holistically at the entire business before drilling down on what might be needed to move the strategy forward to its next stage. A “Way Forward” plan was already in place, which Louvet continued to execute with chief financial officer Jane Nielsen.
Louvet, in a conference call to Wall Street analysts on Wednesday after the company posted fourth-quarter results, detailed some accomplishments and previewed some talking points for the upcoming Investor Day on June 7. On that day, analysts will get to hear more details on the company’s growth and value-creating strategy going forward.
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“We’re on a journey to establish a healthy foundation to get the company back to sustainable long-term growth and value creation. In fiscal 2018, we made strong progress on this journey as we executed on our key strategic initiatives and closed the year with a clear game plan, a strong balance sheet and an engaged team focused on executing with excellence,” Louvet said.
He said the four key initiatives were on elevating the brand via improving quality of sales distribution and product; evolving the product, marketing and shopping experience; expanding digital and international presence, and working new ways to drive productivity and agility.
On the production side, the ceo said the company has achieved the goal of having 90 percent of products manufactured on a nine-month lead time. “This is enabling us to make product decisions much closer to consumer demand,” Louvet said. One of the company’s goals once the nine-month mark was reached was a look at narrowing that timeline even further. During the call, Louvet noted: “We plan to drive further improvements in fiscal 2019 toward six-month and three-month lead times for a certain portion of our products.”
As for fiscal 2018 accomplishments — the company’s fiscal year ended March 31 — Louvet said the company closed 25 percent of its U.S. department store points of distribution and 31 directly operated retail stores. Coupled with assortment discipline and clarity of product messaging, the company said fiscal 2018 revenue per stockkeeping unit was up 16 percent, while gross profit per sku was up 22 percent versus year-ago figures.
The company has also been expanding store networks, particularly in the overseas markets. “The new, small format stores are highly productive,” Louvet said.
As for shopping experience, that too has been the focus on an upgrade, “both in-stores and online,” he said, adding that the company invested in its store environments around the world. “For example, in North America, we refreshed over 80 of our top department store shops in fiscal 2018 through improved fixturing, lighting visual merchandising, product presentation and layout,” the ceo said.
He explained that the new environment creates a lighter aesthetic, with improved product presentation focused on the core items as well as growth categories such as denim. The new updated formats allow for easier navigation for consumers, and has “driven improved sales and margins versus control doors and pre-test trends. We plan to accelerate and broaden these activities in fiscal 2019 across all channels globally,” the ceo said.
Helping the firm reach its customer base, Louvet said the company has increased its marketing spend for digital and social media because they are the channels that matter most to our consumers today. “One of the key elements of our marketing strategy is adopting a more consumer-centric approach,” he said, adding that a recent completion of a major global consumer research study is giving the company “learnings” that will enable it to be more precise about how the firm engages specific consumer groups to make its marketing investments more effective and efficient.
Louvet noted that the company has a new board member, Michael George, who is ceo of Qurate, the parent company of QVC, HSN and Zulily. George, Louvet said, “brings deep experience driving growth and value creation through very unique and evolving retail channels globally.”
The company also plans to add Angela Ahrendts to the board as well. It plans to nominate Ahrendts — former Burberry ceo and now spearheading Apple’s retail arm — for election to the company’s board in August. Louvet said of the future board addition, “She will bring invaluable perspective and experience to bear as we move through our own transformation.”
Compared with the year-ago quarterly loss, the company reported net income in the black this year, at $41.3 million, or 50 cents a diluted share, on net revenues of $1.53 billion. North American comparable-store sales were flat, comprised of up 6 percent in brick-and-mortar stores that was offset by an 18 percent decline at ralphlauren.com due in part to a reduction in promotion frequency. For fiscal 2018, net income was $163 million, or $1.97 a diluted share, on revenues of $6.2 billion.
Ralph Lauren, executive chairman and chief creative officer, said, “Patrice and I have developed a strong partnership over the past year and I am confident that we are on the right path as we kick off our 50th anniversary celebration and build the future of our iconic company and brands.”
Louvet said Polo did well in the quarter, particularly the men’s Polo sweatshirt, which features a technology-infused double-knit fabric. Outerwear was another positive where lightweight and functional fabrics in both casual, weekend and wear-to-work styles drove growth.
While Louvet also noted that the average unit retail across the direct-to-consumer network was up 4 percent for the full year, Nielsen said on the call that the AURs will increase due to product elevation, differentiated assortment and higher price points on the international front helped by a balance of fewer promotions and discounts.
Shares of Ralph Lauren on Wednesday closed up 14.3 percent to $133.31.