Ralph Lau­ren mulls over­haul after tough Q1

National Post (National Edition) - - FINANCIAL POST - KIM BHASIN AND NIC QUEROLO

Ralph Lau­ren Corp. plans to re­vamp its struc­ture as it looks to avoid the fate of sev­eral re­tail ri­vals who’ve been un­able to weather the un­prece­dented season for ap­parel.

The com­pany, which on Tues­day re­ported an adjusted loss per share for the first quar­ter that was worse than the av­er­age an­a­lyst es­ti­mate, said it’s eval­u­at­ing its “long-term op­er­at­ing struc­ture to align with our evolv­ing strate­gic pri­or­i­ties,” with a fo­cus on six main ar­eas, in­clud­ing how it or­ga­nizes its teams, its cor­po­rate office real es­tate foot­print, where it sells its products and its over­all port­fo­lio of brands.

The re­view is aimed at setting up strate­gies for the next sev­eral years as the business emerges from the health cri­sis, chief ex­ec­u­tive Pa­trice Lou­vet said in an in­ter­view.

“We’re mak­ing sure that we’re set up to win, in this new con­text, in the next three to five years. There’s an op­por­tu­nity to re­set in this en­vi­ron­ment, as we look at new con­sumer be­hav­iours and the re­tail land­scape,” he said. “We ex­pect to share the out­come of this work and de­ci­sions over the next few months.”

The in-progress over­haul un­der­scores the sig­nif­i­cant steps re­tail brands must take as the coro­n­avirus pan­demic ex­ac­er­bates an al­ready-chal­leng­ing con­sumer en­vi­ron­ment. Dis­cre­tionary pur­chases, in­clud­ing cloth­ing, have been hurt by wide­spread eco­nomic lock­downs, forc­ing more than two dozen re­tail­ers into bank­ruptcy this year alone.

In­vestors were un­happy with the re­sults. Shares fell as much as 7.5 per cent as in New York to US$64.50, the low­est in­tra­day level since May. They closed down 4.3 per cent at US$66.68.

In terms of store foot­print, the re­view is look­ing at the world­wide net­work, Lou­vet said. Ralph Lau­ren ex­pects to open as many as 90 stores in 2020, with the vast ma­jor­ity in Asia, less than a dozen in Europe and only few in the U.S.

“The re­view will lead to some choices on ar­eas we want to exit and ar­eas that we want to open,” he said.

The com­pany in the first quar­ter al­ready took mea­sures to curb costs, in­clud­ing cuts to ex­ec­u­tive pay and em­ployee fur­loughs. Ne­go­ti­ated rent abate­ments and lower ex­penses due COVID-19 clo­sures also helped shore up cash.

It is also setting goals to ex­pand the di­ver­sity of its work­force, in­clud­ing in­ter­view­ing two un­der­rep­re­sented can­di­dates for ev­ery lead­er­ship po­si­tion, Lou­vet said on the com­pany’s earn­ings call. The goal is to have peo­ple of colour rep­re­sent at least 20 per cent of the com­pany’s global lead­er­ship by 2023.

Lou­vet said he ex­pects the past quar­ter to be the tough­est through­out the cri­sis, but a lot of un­cer­tainty lingers as re­tail­ers prepare for the cru­cial hol­i­day season.

“We are ap­proach­ing hol­i­day cau­tiously,” Lou­vet said in the in­ter­view. “We don’t want to be in a sit­u­a­tion where we need to dis­count.”

Ralph Lau­ren re­ported a loss of US$1.82 a share in the quar­ter, worse than the US$1.73 loss an­tic­i­pated by an­a­lysts. Com­pa­ra­ble-store sales plunged 57 per cent, also trail­ing es­ti­mates.

North Amer­ica rev­enue saw the biggest dropoff, plung­ing 77 per cent to US$165 mil­lion. Europe rev­enue de­creased 67 per cent and Asia fell 34 per cent. Com­pa­ra­ble sales also logged double-digit de­clines in ev­ery re­gion, even as all three mar­kets saw an uptick in dig­i­tal sales.

While the re­sults were “ter­ri­ble,” they weren’t unique to Ralph Lau­ren, said Neil Saun­ders, man­ag­ing di­rec­tor of Glob­alData Re­tail.


“We’re mak­ing sure that we’re set up to win, in this new con­text, in the next three to five years,” says CEO Pa­trice Lou­vet.

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