Ralph Lauren Jumps as Founder-CEO Relationship Underpins Rebound

(Bloomberg) -- Ralph Lauren, the designer, gave a vote of confidence to his namesake company’s new chief executive officer -- a move that heartened investors as the fashion brand leaves behind management frictions of the past.

Patrice Louvet, who took over as CEO last year, seems to be getting along well with company’s 78-year-old founder: “Patrice and I have developed a strong partnership over the past year, and I am confident that we are on the right path," Lauren said in a statement Wednesday. The shares surged the most in 2 1/2 years.

This contrasts with the clashes that marked the tenure of Louvet’s predecessor, Stefan Larsson. While Ralph Lauren has struggled, like many brands, with changing consumer tastes and and an over-reliance on discounts, its management instability has also been a key concern.

Lauren and Louvet’s rapport can be seen in Ralph Lauren’s latest quarterly results, with profit and sales beating expectations. The shares jumped as much as 15 percent to $134.39 on Wednesday, the highest since November 2015.

Neil Saunders, an analyst at GlobalData Retail, said Ralph Lauren is becoming more operationally stable and is slowly moving in the right direction.

"There is a sense that the company is serious about resolving its various issues," he said.

Born Ralph Lifshitz, Lauren started his fashion empire in the late 1960s by selling ties out of Bloomingdale’s. The New York-based company went public in 1997 and has expanded across categories, from polo shirts to throw pillows. In 2015, the founder stepped down as head of the brand he ran for decades and hand-picked Larsson as his successor.

Larsson’s 2017 departure, after he couldn’t agree with Lauren on the brand’s creative direction, came as a surprise to many. He had been lauded for streamlining Gap Inc.’s Old Navy brand and keeping mass-market merchandise trendy. He also worked at H&M, the fast-fashion retailer that follows trends more than it sets them.

Excluding some items, Ralph Lauren profit was 90 cents a share -- beating analysts’ 83-cent estimate. Comparable-store sales fell 1 percent when accounting for currency fluctuations -- less than the 2.3 percent decline expected by Consensus Metrix. Revenue also exceeded estimates.

The company said the earlier timing of the Easter holiday helped boost sales. Sales to foreign tourists also rose after 15 consecutive quarters of declines.

--With assistance from Justina Vasquez.

To contact the reporter on this story: Kim Bhasin in New York at kbhasin4@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder, Lisa Wolfson

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