Ralph Lauren refreshes its faded Jeans

The fashion house’s management team, led by new CEO Patrice Louvet, appears to have righted the ship

Ralph Lauren, which is getting ready to celebrate its 50th anniversary, has seen some turbulent times. Revenue has fallen as consumers stopped making trips to the mall. Stefan Larsson, the Swedish executive brought on in 2015 to revive the faltering fashion house, left after less than two years at the helm. (He reportedly clashed with Mr. Lauren over creative control). Then the company announced it was shuttering its Fifth Avenue store.

But Ralph Lauren’s management team, led by new CEO Patrice Louvet, appears to have righted the ship. On May 23, 2018 it reported fourth-quarter and full-year results that beat analysts’ expectations: earnings per share of 90 US cents and revenue of USD 1.53 billion, topping estimates of 83 cents and revenue of USD 1.49 billion, respectively. The stock jumped over 14%.

The company has improved margins by taking control of inventory and strategically reducing shipments and promotions.

“It’s a prime example of a management team controlling the controllables. They’ve earned their credibility,” says Simeon Siegel, an analyst at Nomura Securities.

The question now is whether they can shift from a margin-recapture to a sales-generating business. “That next leg is harder,” he adds.

Sales for the quarter were up 13 % in Europe and 17 % in Asia, but down 14 % in North America, largely due to the strategic pullbacks. Overall revenue fell 2 %.

Can Ralph Lauren rekindle the kind of consumer interest it needs for a true resurgence?

There are signs that Mr. Louvet, who took over last July, is bringing a new focus on listening to, rather than talking at, the consumer, including a big study on consumer perceptions of the brand.

That is a welcome, if overdue, shift. It has resulted in a strategy that involves returning to and updating Ralph Lauren’s core styles—for instance, with new fits, fabrics, embroidery and embellishments. It also involves doubling down on certain categories, like denim and outerwear, where the company believes consumers have given it a license to do more.

The larger aim is to refresh a faded brand. If Ralph Lauren can find ways to resonate with consumers as it once did, investors can look forward to good things as the brand enters its next half-century.