Ralph Lauren sales tumble

After a slight uptick in performance at the close of last year, Ralph Lauren sales have tumbled.

Compared to 2015 – when total revenues declined by 5 per cent, wholesale by 9 per cent, and retail by 3 per cent – the latest sales figures are decidedly weak.

In the first quarter of the new fiscal year, net revenues fell for a fifth straight quarter, dropping 4 per cent to US$1.6 billion

The wholesale numbers are wholly understandable and are thanks, in large part, to the car-crash that is the American department store channel. While Ralph Lauren has representation in stores like Macy’s the fact that its sales areas look like a flea-market do nothing to help the brand or its revenues. This is further exacerbated by the generally weak customer traffic at department stores across the past few months.

The retail numbers are much more of a disappointment, and a concern given that this division delivers the largest chunk of revenue. Ralph Lauren has been keen to emphasise its Way Forward Plan, which it says is changing the operational structure of the business so that it can deliver growth. As much as many of the actions are prudent, it feels like the company has been turning itself around in perpetuity. At some point, these actions need to deliver growth – something they are currently failing to do at either the sales level, or on the bottom line where the company posted a $31 million operating loss for the quarter.

Decisive action is needed to put the brand on the right track. This includes withdrawing from department stores like Macy’s which are now actively damaging the Ralph Lauren brand, and focusing only on more upscale department stores like Nordstrom and Neiman Marcus as sales channels.

A proper brand review is also needed as Ralph Lauren has become muddled and confused and is simply not competing effectively against brands like Vineyard Vines, which have good traction with younger, high spending consumers. Some action has already been taken to simplify the brand structure but much more clarity is needed in communicating the various parts of the offer to consumers. At present the various parts of Ralph Lauren are too hit and miss.

Reconnecting with younger consumers is also a priority. Rather like Tiffany, Ralph Lauren is seen as an older, established brand that, while not actively disliked, is less relevant than it was a generation ago. Spin-offs like Club Monaco and RRL have helped to remedy this, but the company needs to put more energy and effort around extending and expanding their reach.

That said, current plans should deliver some cost savings over the course of this fiscal as operations are streamlined. However, expect the plan’s impact on revenue to be negative across at least the next quarter.

 

  • Håkon Helgesen is a retail analyst at Conlumino.

 

 

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