Ralph Lauren’s “Way Forward” Draws Keen Interest | RetailNext

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Ralph Lauren’s “Way Forward” Draws Keen Interest

Shelley E. Kohan
Shelley E. Kohan
Vice President of Retail Consulting

Entwined with the travails of the department store segment, Ralph Lauren is embarking on sweeping organizational changes in an effort to reinvigorate the iconic brand. Will stakeholders have the patience to see the “Way Forward” plan through to completion?

Ralph Lauren, one of the world’s most iconic apparel company brands, has garnered more than its fair share of media attention over the past two weeks, and there has been a lot of “knee jerk” reactions to its recent management decisions and its “Way Forward” plan. However, the Way Forward plan is a very transparent strategy, and sharing the plan with the investor community and the key stakeholders of the business is brilliant in and of itself. There is encouragement in the simple fact that the company is being candid about its business strategies, and while this creates many of the knee jerk reactions, if you examine “how” Ralph Lauren is planning on executing the initiatives, it’s evident the plan is well thought out. Due diligence, transparency and courageous decision-making are exactly what is needed in the retail environment today. 

Ralph Lauren stock price chart

In today’s ultra-competitive environment, many retailers and brands are re-evaluating operating models – cost structures, store portfolios, speed-to-market, distribution processes, leadership hierarchies, etc. – in an effort to make organizations more efficient and profitable. Ralph Lauren has the additional challenge of continuing its presence as an iconic brand reflecting an aspirational lifestyle, and one of its primary challenges is to define what “aspirational” means to today’s shopper. 

Other challenges being addressed are stock turn (right sizing the inventory assortment in terms of quantity and differentiation) and, specific to Ralph Lauren, going back to its iconic legacy and focusing on product development and marketing. There has been such an allure about Ralph Lauren that it could very well be considered a marketing company that happens to sell amazing products. A recent report by Fung Global Retail & Technology revealed core products represent 30-35 percent of Ralph Lauren’s styles, but contribute 70 percent of its profits. 

Recently, Ralph Lauren and other apparel brands have encountered challenging business climates due to an over saturation of markets, both in product and the number of retail stores, particularly in the United States, where the market is over-stored and blanketed with product sameness. Differentiated product and experiences with the brand are key to future success in retail. As discussed by Ralph Lauren CEO Stefan Larsson, the company may have lost focus on the both of those key elements. 

CEO Stefan Larsson and former CEO and Designer Ralph Lauren.

CEO Stefan Larsson and former CEO and Designer Ralph Lauren.

According to Larsson, the strategic plan is to strengthen the brand, drive sustainable profitable sales and deliver shareholder value, all strategic facets most brands should be executing against. However, for Ralph Lauren and others, effective execution will come with tough business decisions. Courage in today’s retail climate is essential, and those brands making the difficult decisions will, in the long run, survive and thrive. 

Organizational structural changes are one area where tough decisions will need to be made. One of the trends that I have been speaking about this year is the need for organizations to become flatter, delivering greater agility and closer contact between management and both customers and employees. Brands must become more nimble in both structure and in decision-making, and cumbersome legacy management hierarchies will not empower prosperity in the current environment.

Larsson and his team have the capabilities to run the business in today’s challenging environment, and all retail and fashion pundits should trust the instinct of Ralph Lauren himself, who has built a monumental  brand over the past 50 years. The question, perhaps, is “Will investors have the patience and fortitude to wait out the execution of the ‘Way Forward’ plan?”

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