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Ralph Lauren CEO: ‘We Have Confidence in a New Post-Pandemic Fashion Cycle’

In a “year of profound challenge and reflection,” Ralph Lauren, executive chairman & chief creative officer of his eponymous apparel empire, said the company hopes its vision of “inclusive” luxury is “what people are craving.”

And fourth-quarter fiscal 2021 results would indicate that the New York company is making some sound moves. Digital sales jumped 52 percent for the year, propelling Ralph Lauren to an adjusted earnings beat against the loss Wall Street had projected.

In a Nutshell: Global digital sales rose 52 percent across all regions in the Q4, with digital operating margins rising in each geography, the company said.

In a Wall Street conference call, president and CEO Patrice Louvet, said the company is in “growth mode” and has been “driving increased marketing to deliver higher brand awareness purchases.” Ralph Lauren has repositioned its brands across its channels and pulled back from underperforming distribution points, especially in wholesale. It has exited over 200 U.S. department store doors—reducing wholesale doors by 61 percent, Louvet said—and significantly trimmed off-price sales.

Louvet said the company further diversified across geographies and shortened lead times for two-thirds of products to six months or less, two years ahead of plan.

Digital remains a top priority at Ralph Lauren. It sped up connected retail programs merging online with offline touchpoints, meaning consumers could seamlessly engage with digital catalogs, pick up web-based orders in stores and at curbside, take advantage of mobile checkout and use Klarna to make paying for purchases more palatable. It also added virtual showrooms in the quarter.

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“Connected retail options now represent the high single-digit percentage of our retail revenues in North America,” Louvet said, versus a high-teens percentage in Europe.

In the quarter, the company applied digital ID tagging to 50 percent of products. “These not only enable product authentication and support for circularity, but also provide consumers access to detailed product information,” he said.

Ralph Lauren also open sourced its new cotton dyeing initiative, which aims to be the world’s first scalable zero-wastewater platform.

“Furthermore, we have confidence in a new post-pandemic fashion cycle,” Louvet said, based on the strong performance from spring collections. Iconic mesh blazers, novelty sweaters, sportswear, loungewear and dress offerings are resonating with shoppers, he added.

Ralph Lauren classics have been updated and “elevated” to resonate with “consumers who are looking for a different kind of luxury coming out of the pandemic,” Louvet said.

In addition to bringing in more than 4 million new consumers—who are generally younger, and more profitable—Louvet said Ralph Lauren can pivot quickly to meet consumer interests, whether that’s loungewear or a sophisticated casual clothing, and expand into underdeveloped categories like home. The company is currently scouting potential new store sites.

Jane Nielsen, chief financial officer, said the company’s guidance on fiscal 2022 outlook reflects April restrictions in Japan. Outside of Japan, key markets in Asia “have returned to a more normalized growth trajectory,” she said. Ralph Lauren sees significant long-term growth opportunities in the region, particularly in China, which “now represents about six percent of total company revenue, nearly double the penetration, from a year ago.”

Nielsen noted continued Covid-related supply chain disruptions, and ongoing restrictions, primarily in Europe and Japan, for fiscal 2022.

Ralph Lauren plans to sell Club Monaco to private equity firm Regent L.P. and transitioned Chaps to a fully licensed model.

Ralph Lauren has launched its own subscription service, The Lauren Look, allowing fans of the fashion brand to rent new apparel each month.
Looks from Ralph Lauren’s apparel rental program. Courtesy

Net Sales: Total revenues rose 1 percent to $1.29 billion from $1.27 billion for the fourth quarter ended March 27.

By region, sales in North America were down 10 percent to $569.0 million, while sales in Europe were up 5 percent to $370.1 million. Asia, a growing market for the company, grew 35 percent to $289.4 million.

The company said that stronger than expected fourth quarter gross and operating margins drove a 30 percent increase in average unit retail, helped by continued expense reductions. It launched a women’s subscription rental program called The Lauren Look, offering products from the Lauren Ralph Lauren brand.

For the year, total revenue fell 29 percent to $4.40 billion from $6.16 billion.

Earnings: The company narrowed its net loss to $74.1 million, or $1.01 a diluted share, from a net loss of $249.0 million, or $3.38, in the same year-ago period. On an adjusted basis, net income was $28 million for the quarter, or 38 cents a diluted share.

Wall Street was expecting an adjusted diluted loss of 73 cents a share on revenue of $1.21 billion.

For the full year ended March 27, 2021, or fiscal 2021, the net loss was $121.1 million, or $1.65 a diluted share, against net income of $384.3 million, or $4.98, for the same 2019-2020 period, or fiscal 2020.

For fiscal 2022, the company expects revenues to increase by 20 to 25 percent on a constant currency basis for the 52-week period. It said the 53rd week is expected to contribute 140 basis points to revenue growth.

For the first quarter, revenues are “expected to increase approximately 140 percent to 150 percent in constant currency to last year.” Current guidance could change if lockdowns or restrictions in Europe and Japan are extended. Projections reflect the planned Club Monaco sale, which should close by quarter’s end.

CEO’s Take: “This fiscal year, we fundamentally repositioned our company for long-term success—accelerating our digital and marketing capabilities, eliminating structural headwinds, focusing our brand portfolio and realigning our cost structure—all while continuing our brand elevation journey around the world,” Louvet said. “Looking ahead, even as the environment remains volatile, with the strength of our brand, our teams and operational position, we are confident in our ability to deliver sustainable long-term growth and value creation in fiscal 2022 and beyond.”