Ralph Lauren's Management Reorganization is Still Costing the Company

The hope, of course, is to spend now in order to save later.
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Eliza Brooke
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The hope, of course, is to spend now in order to save later.
Ralph Lauren takes a bow. Photo: Mike Coppola/Getty Images

Ralph Lauren takes a bow. Photo: Mike Coppola/Getty Images

Less than a week into his tenure as CEO of Ralph Lauren, Stefan Larsson connected with investors to report the company's financials for the second quarter of the fiscal year, which ended Sept. 26, and, since he admits he still has a lot to learn about the inner mechanisms of the brand, to provide a little hype-man style enthusiasm for the job ahead of him. Larsson, who came to Ralph Lauren from Old Navy and H&M before that, says that consumers want something special and unique, underpinned by a real story. That's what Ralph Lauren, a massive brand founded by a kid from the Bronx, has always provided.

True enough. So how is the brand's "dream of a better life" (Larsson's words) working at the moment? Pretty well, especially if you're standing in Europe, where execs say wholesale reorders are stronger than they've ever been — less so if you're talking about the United States, Korea, Hong Kong or Macau. That's consistent with what we're seeing from other brands at the moment: Decreased shopping activity in the wake of Korea's MERS outbreak and lower tourist traffic to Hong Kong and Macau are affecting most global fashion labels. All together, net revenue for the quarter grew about 4 percent to $1.97 billion.

Last quarter, Ralph Lauren's profits took a big hit thanks to costs from a company-wide reorganization, through which it's established six global brand groups each with its own global brand president. The hope there is to create efficiencies that will save the company $110 million in the long term, but it's still costing Ralph Lauren at this point. After spending $45 million on the restructure during the first quarter, the brand put another $38 million toward the cause this time around.