Ralph Lauren Won’t Let Go of His Shrinking Polo Empire
Lauren is betting on an outsider to revitalize the company he founded.
(Bloomberg) -- The first time fashion designer Ralph Lauren tried sharing control of his retail empire ended badly. The new CEO left after only 18 months. Creative clashes, they both acknowledged.
Now the 77-year-old Lauren is making another bet on an outsider to help revitalize the company he founded a half-century ago. Patrice Louvet, a former Procter & Gamble Co. veteran, started as CEO in July amid promises of an amicable working arrangement.
But Lauren, who often refers to the company as “my baby,’’ isn’t going anywhere. He remains heavily involved running the business, working at the Manhattan headquarters about four days a week, people familiar with the matter said. And he’s made sure that he retains control over the creative side of the business.
Louvet’s contract contains a provision, largely unnoticed, that ties his hands. Lauren, who remains chief creative director, retains a final say in brand and creative decisions, as well as in hiring and firing senior executives in design and marketing areas, the contract states. The previous CEO, Stefan Larsson, 43, who left in May, had no such restraint.
All this raises questions for a company that is struggling to reverse a three-year slump in same-store sales in a tumultuous retail environment. Retail experts say Ralph Lauren could use fresh thinking as it tries to revitalize a brand that has lost cachet. Even signature Polo Ralph Lauren polo shirts aren’t selling like they used to, losing business to hipper brands such as Vineyard Vines. While the company relies on an aspirational image of beaches and yachts, other retailers are turning to celebrities like singer Selena Gomez and model Gigi Hadid as their brand ambassadors.
“He’s obviously someone with an iconic view and what he’s achieved is incredible,” said Simeon Siegel, an analyst at Instinet LLC. “That said, retail has evolved and the company has not responded to that as fast as its peers. That’s the issue.’’
This year, Ralph Lauren dropped off a ranking of the 100 best global brands for the first time since 2011, according to consultant Interbrand, which looks at things like financial return and customer loyalty. The company has been closing retail locations, including the flagship Polo store on Fifth Avenue, and its stock has dropped by more than half from its peak in 2013. The shares, which declined 16 percent in the past year, fell as much as 2.3 percent on Thursday.
“The combination of Ralph and Patrice’s experience lends itself to a powerful partnership,” the company said in a statement. “Together with the company’s leadership team, they are already evolving how our iconic brand is experienced and expressed, and we are encouraged by the early progress.”
The 53-year-old Louvet said during an analysts’ call in August that Lauren was in charge of the creative side of the business and he would lead the company’s strategy, execution and business results.
Lauren’s longevity in retail fashion is unusual. He was 23 when he had his first big success. He convinced Bloomingdale’s to buy his wide ties when narrow neckwear was in vogue. His old-money styles have been followed and copied worldwide, and today he’s worth almost $6 billion, according to the Bloomberg Billionaires Index. He controls the majority of the company’s voting shares with his family.
But the company, like other retailers, has been hit hard by the shift to online shopping from brick-and-mortar locations, forcing department stores to discount products. Ralph Lauren relies on retailers such as T.J. Maxx and Macy’s Inc. for more than 40 percent of its sales.
Meanwhile, its product styling and marketing remain largely stuck in the past, retail analysts say. Ralph Lauren, which has historically succeeded on the back of its founder’s vision, continues to use him as a primary face of his company. Top pages of Polo Ralph Lauren’s Instagram account show old pictures of the founder and his family.
The troubles show up in sales of its polo shirt, which remains one of Ralph Lauren’s biggest revenue sources. The three best-selling full-priced polo shirts in the last six months are from Antigua, Nike and Moncler. Polo Ralph Lauren ranks 21st, according to fashion analytics company Edited.
Analysts thought they saw signs of change in 2015 when Lauren, for the first time, stepped down as CEO and hired Larsson, a former H&M and Old Navy executive. He slashed more than 1,000 jobs and reduced the time it took to bring new fashion to the market.
But Larsson and Lauren clashed over the CEO’s efforts to reinvent products, focus on core brands and bring in fresh design talent, according to people who declined to be named because the information is private. Larsson also faced resistance from employees close to the fashion idol. And there was a division between the creative and business operations. Lauren’s design team often pushed back suggestions from the wholesale group to align its products with what’s selling, the people said.
Larsson’s departure followed disagreement over his authority to overhaul the business, they said. He declined to comment, according to his representative.
Louvet hasn’t yet detailed his strategy but told analysts he wants to improve the brand image, beef up the company’s online strategy and enhance the customer shopping experience. During 25 years at P&G, Louvet’s experience included running the global beauty business and fashion brands such as Gucci and Hugo Boss.
There are signs that Ralph Lauren is trying to win back customers and create hype by bringing back its vintage pieces, for example. Its latest quarterly results showed it was making headway in getting customers to pay full price, even as same-store sales continued to fall. It will report its second-quarter results on Nov. 2.
But Lauren and Louvet face more crucial decisions. Analysts have urged the company to reduce its roughly dozen brands to avoid consumer confusion, but that would mean sacrificing sales. And it needs to enhance its premium image and reduce its exposure in the mass market.
“A lot of his reputation is at stake on this,” Neil Saunders, managing director of GlobalData Retail, said of Lauren. “If this goes wrong again, it will tie back to him and investors will start to question whether he’s actually more of a liability or an asset.”
To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, David Gillen Larry Reibstein Jonathan Roeder