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Ralph Lauren Reveals What’s Next

Twenty million and counting is how many new customers are now shopping Ralph Lauren Corp. direct-to-consumer channels from four years ago, president and CEO Patrice Louvet said at an investor gathering Monday, after company executives rang the New York Stock Exchange opening bell to mark the Polo owner’s 25th year as a public company.

Ralph Lauren today v. 2018

Ralph Lauren has largely shed its wholesale image with 63 percent of business now coming from DTC. Many of the company’s newer, younger customers are purchasing “more elevated full-price items,” Louvet said, crediting efforts around brand elevation with driving “strong sustainable pricing power” and helping raise average unit retail (AUR) by 60 percent.

In fact, Ralph Lauren has dropped two-thirds of its U.S. wholesale department store doors and halved its participation in off price over the past few years. Digital accounts for about one-quarter of commerce, though new digital flagships in Taiwan, Canada, Singapore and Malaysia and other markets will grow that business in addition to 250 new stores opening in the next three years.

Raising marketing spend to 7 percent from 3.5 to 4 percent of revenue has given Ralph Lauren the firepower to open 450 new standalone stores and concessions since 2018.

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The company is working to convert its base into multi-channel consumers who are quadruple the value of single-channel shoppers. It created a new consumer intelligence tool called CIX leveraging analytics and artificial intelligence (AI) to precisely target shoppers.

Louvet said Ralph Lauren has finished the hard work of turning itself around and is ready for the “Next Great Chapter: Accelerate” plan through 2025.

The plan focuses on finetuning brand positioning, homing in on high-potential, under-penetrated categories, and firming up its digital presence in the global top 30 cities.

Executive chairman and chief creative officer Ralph Lauren, who said the apparel maker started “over 50 years ago with a dream and a tie,” credited Louvet for putting “this company in the right place.”

Product, and high-potential categories

The company spent the past few years polishing five core products such as the polo shirt, the Chino and the double-breasted blazer. Efforts to position the company as premium seems to be working, “with now 74 percent of consumers perceiving Ralph Lauren as a luxury brand,” Louvet said.

The company sees strong potential in outerwear, women’s wear and denim, categories that could use a boost. High-margin outerwear resonates with younger generations, Louvet said, noting that it has more than doubled to nearly 10 percent of the overall business.

Halide Alagöz, chief product officer, said outerwear, home and womenswear have already grown 50 percent versus last year.

“The single largest opportunity is our women’s wear business. We are among the few brands that can dress her for every occasion of her life,” she said.

Alagöz said the company is working to get the men’s-heavy U.S. business closer to Asia’s more balanced dual-gender split. And she said that the Lauren brand is on a “strong growth trajectory,” allowing for a “meaningful opportunity” to scale the Polo women’s business around apparel, footwear and handbags. She said that since Fiscal 2018, Polo women’s has grown by 38 percent.

“Our woman’s consumer is also growing at a faster pace in our DTC channels,” Alagöz said.

Ralph Lauren has diversified sourcing “so no single production market today produces more than 20 percent of our business,” she added, pointing to “near-shoring capabilities, which creates shorter lead time opportunities for each region.”

Branding, retail and digital

David Lauren, chief branding and innovation officer, said the company squeezed 21 billion media impressions out of J. Lo, Alicia Keys and Lady Gaga’s Met Gala appearances dressed in Ralph Lauren.

Iris Langlois-Meurinne, chief marketing officer, said “some of our top customers spend up to $1.6 million a year with us, and $7.7 million on the lifetime value basis.”

She described the metaverse as “a new playground for us to recruit new consumers of the new generation.”

Bob Ranftl, regional CEO for North America, said smaller, 10,000-square-foot stores are attracting new and younger consumers. The top 30 cities include 14 in North America, eight in Europe, and eight in Asia, he said.

And Shin Hwee Chua, regional CEO for China and Southeast Asia, said the company is focused on Beijing, Shanghai, Chengdu, Shenzhen, Hong Kong and Taipei. It has opened 135 stores en route to 150 by Fiscal 2023 and has seen a 45 percent increase in AURs over the past five years.

“Livestreaming helps to amplify our brand storytelling,” she said, pointing to social-media-friendly work with celebrities and key influencers

And Janet Sherlock, chief digital and technology officer, said that digital since 2018 has grown to $1 billion, “more than double our $500 million commitment. Digital now comprises 26 percent of total company revenues on a sell-out basis versus 12 percent in [Fiscal Year 2018].”

Content and media including video makes a measurable impact. “All this helps the consumers to be guided in their purchase decisions and drives conversion,” she said, noting that on average, “consumers who engage in our storytelling content spend over $100 more per order than our sites’ average order value.”