With discounters flailing in the face of inflation and uber luxury brands soaring, it’s more clear than ever which side of the fashion divide is winning right now.
And while it remains to be seen just where the demarcation lies, Patrice Louvet knows he’s on the right side of the fashion spectrum, having spent four years elevating the brand and boosting prices at Ralph Lauren Corp.
Long before the COVID-19 supply chain back ups gave everyone cover to charge more last year, the president and chief executive officer started moving average unit retail prices up, tightening distribution and doubling down with brand storytelling. In its own direct-to-consumer network, Ralph Lauren’s average unit retail prices grew 15 percent in its latest fiscal year, coming on top of a 26 percent rise the year before.
Instead of pushing pure volume, growth was designed to come from developing categories, like home, and building in new markets while bringing in more consumers under 35.
The strategy is now paying dividends.
“We now have multiple engines of growth,” Louvet told WWD. “We’re driving growth across every brand, every channel, every region.
“Our game plan is working,” he said. “It’s a game plan that’s resilient in the face of macro uncertainty.”
That seems to be the key for this moment in the pandemic, where consumers are back in stores but the economy is confused by inflation, war and more.
Brands need to be ready to win when possible and then ready to change quickly when needed.
Ralph Lauren’s fourth-quarter net earnings tallied $24.4 million, or 34 cents a share, for the firm and compared with losses of $74.1 million, or $1.01, a year earlier.
Adjusted earnings per share came in at 49 cents, well ahead of the 38 cents analysts projected.
Revenues for the three months ended April 2 increased 18 percent to $1.5 billion from $1.3 billion. The top line in North America rose 19 percent to $674 million as Europe increased 26 percent to $467 million and Asia rose 20 percent to $346 million, despite some “adverse impacts” tied to the COVID-19 lockdowns in China that will extended into this quarter.
This past year, the company opened 122 new stores, expanding from Milan to Miami. It has also returned to the runway and made new overtures to consumers, for instance linking up with the historically black Morehouse College and Spelman College in a bid to present a more inclusive take on American style.
In all, the company brought in 1 million new consumers during the quarter, or 5 million over the past year.
Ralph Lauren’s annual sales jumped 41 percent to $6.2 billion. And while that rate won’t continue, the company is consolidating its gains and looking to keep growing off that bigger base, with revenues projected to increase in the high-single digits on a constant currency basis.
Analysts on a conference call were complimentary about the quarter, but investors are still in sell-mode, trading shares of Ralph Lauren down 2.4 percent to $88.78 in midday trading in another down day for the market.
Louvet acknowledged that there would be bigger cost headwinds this year, complications from currency fluctuations and impacts from COVID-19, but said the brand and its consumers are solid right now.
“As consumer habits change, we’re able to flex with that and meet the consumer where he or she wants to be based,” the CEO said. “We’re grounded in reality and watching closer consumer sentiment.”
But so far, so good.
“Our consumer continues to be healthy, strong and we’re seeing strong demand both across replenishment of their core wardrobe and also investments in newness and more sophisticated product,” he said.
Part of that comes from giving shoppers more as they pay more, whether it be in the form of better product, better marketing or a better experience online and off.
“We’re very cautious around consumer value,” Louvet said. “Our consumer value scores are increasing. Differently from many companies, which are now jumping to take price because of inflationary pressures, we are being very deliberate on the product quality, design and elevation.”
That is very much in keeping with the philosophy of the company’s namesake.
Executive chairman and chief creative officer Ralph Lauren added: “From our latest fashion show to the launch of our powerful Morehouse and Spelman colleges collection, we continue to inspire people all over the world to dream. Whether it’s our clothes or how we think about our impact on the planet, we imprint all we do with a spirit of optimism and timelessness that give people a sense of possibility.”
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