Ralph Lauren Corp. is streamlining global operations to accelerate its Next Great Chapter plan for sustainable long-term growth, one that involves a headcount reduction of 15 percent.
The $6.16 billion apparel giant has been evaluating the company’s cost structure, focusing on team organizational configuration, real estate footprint including distribution centers and corporate offices, and its brand portfolio. President and CEO Patrice Louvet said in May during the company’s fourth-quarter call to Wall Street that Ralph Lauren will emerge from the coronavirus outbreak leaner and more agile. In August, during the company’s first-quarter call, Louvet said the firm was taking the opportunity during the disruption to accelerate its core strategic focus areas and “realign our resources accordingly.”
Following its review, the company on Tuesday said the streamlining includes a 15 percent reduction in its workforce, or about 3,600 employees from a total headcount of 24,000. The reductions in its global workforce is expected to be completed by the end of Fiscal 2021.
The company also said its Fiscal 2021 Strategic Realignment Plan anticipates future additional actions connected with initiatives disclosed on Tuesday.
More importantly for its future, the company is including a number of enhancements to its technology platforms, in addition to creating a flatter team structure that consolidates its global marketing and branding functions. Other initiatives involve the creation of a new Consumer Intelligence and Experience organization focused on leveraging consumer insights and predictive analytics to drive personalized consumer experiences at scale, as well as reorganizing its corporate merchandising teams. The company said it also continues to integrate Global Citizenship and Sustainability into every aspect of its business, “making it a key responsibility for all leaders.”
The company said it is also transforming how it operates with new technology platforms across several key areas of its business, including a cloud-based human resources and planning system and elevating how it delivers for consumers through its company-wide Digitizing the Value Chain project to better connect teams and digitize the product journey to enable faster decision-making from design to market. The aim of the changes is to support and elevate the Ralph Lauren vision and voice globally, while maintaining strong local capabilities and expertise, as well as enable strong consumer insights and empowering teams to make faster decisions, the company said.
Like others in the apparel and retail sector, the company was hit by the pandemic that saw temporary store closures, resulting in staff furloughs in April, and a slowdown in future orders as companies adjusted to the new normal coming out of the initial virus outbreak. While the company was able to leverage the talent of its employees by reassigning some across other areas to high-need functions, Tuesday’s disclosure of its new strategic plan is the first time the company has announced permanent layoffs post-Covid-19.
The workforce reduction is expected to result in annualized pre-tax expense savings of $180 million to $200 million, with savings realization mostly beginning in Fiscal 2022. The company also will incur estimated pre-tax charges of $120 million to $160 million.
“The changes happening in the world around us have accelerated the shifts we saw pre-COVID, and we are fast-tracking some of our plans to match them–including advancing our digital transformation and simplifying our team structures,” Louvet said. “These steps will enable us to progress our brand elevation journey and deliver Ralph’s vision in today’s dynamic environment–inspiring our consumers around the world and creating value for all of our stakeholders.”
“Over 53 years ago, this company started with a single tie and a dream that made it into a way of life….Through it all, our commitment to stay true to who we are, while evolving with the world around us, has helped to secure our future and our place as one of the world’s most beloved and inspiring brands,” Ralph Lauren, chairman and chief creative officer, said.
The apparel firm has done some restructuring prior. After Stefan Larsson joined the company in September 2015 as CEO, the first made changes to its management team. A month later, the company trimmed full-time headcount by 8 percent as part of his “Way Forward” turnaround plan. Larsson exited the company in May 2017 following reports of a clash with founder Ralph Lauren. He has been president of PVH Corp. since May 2019. Larsson was succeeded at Ralph Lauren by Louvet in July 2017, who implemented the follow-up five-year “Next Great Chapter” plan in June 2018.