At a time when many other luxury players are posting modest declines in revenue, Ralph Lauren has put out a pleasingly positive set of numbers that show growth on an overall basis across all regions.
Admittedly, the uplifts are very modest – with total revenue growing by just 0.9 per cent – to $1.83 billion – but given they come off the back of stiff prior year comparatives and a tough market, they nevertheless represent a very solid performance.
Part of the reason for Ralph Lauren’s relative outperformance is that it is at an earlier stage of reinvention compared to brands like Coach or Michael Kors. As such, it still reaping the rewards of many of the corrective actions it is taking to elevate its offer and reduce its reliance on third parties to sell its product. This set of results will give the group the confidence and firepower to forge ahead with further changes.
The reinvention program was instrumental in delivering some solid numbers over the holiday period. We were particularly pleased to see more discipline around markdowns and promotion – especially during a time when the whole market was driven by offering various bargains and deals. This, in turn, reflects a much more focused effort around ranges and products – especially those sold directly to consumers.
On the product front, Ralph Lauren was very aligned with trends over the quarter. It benefitted from a flight to quality, which saw some groups of consumers – especially those in middle- and higher-income segments – focus on buying good quality that lasts rather than buying cheaper, more disposable items. This helped Ralph Lauren’s core range of everyday staples. Outside of the core assortment, Ralph Lauren also pivoted to align itself with the trend towards dressier, elevated styles and away from the casual, cozy vibe that was present across most of 2021 and 2022. This was well received by consumers and helped the group to push up average transaction values. While a smaller part of the business, a tailoring is also coming back after being in the doldrums which is helping Ralph Lauren’s more formal selection.
Having the right assortment requires skill, but so too does marketing and promoting it effectively. On this front, we feel that Ralph Lauren continues to do a good job – including on newer channels such as social media, which included a pre-holiday collaboration with Fortnite involving drops of digital outfits. While these activities can seem niche, they are helping to connect Ralph Lauren to a younger generation of consumers who are willing and able to spend on its products. In a sense, this is an important part of the move to selling more direct and taking back control over distribution.
While Ralph Lauren is making good strides in its direct-to-consumer business, we remain critical of the sales effort through third parties. While some of this is outside of Ralph Lauren’s direct control, the offer in mainstream department stores continues to look terrible and detracts from the brand’s wider efforts. The problem here is that without a strong network of its own stores, Ralph Lauren remains dependent on partners to promote and distribute its product. We can see a trajectory in which it becomes much less reliant, but this will take time to deliver.
Overall, we think the actions Ralph Lauren has taken over the past year are now coming together nicely. There is more work to be done and the brand could benefit from some further refinement, but it is clear that the business is now on the front foot in a way that it has not been for a very long time. The one thing that could blow it off course – albeit temporarily – is a big downswing in the consumer economy.
