Ralph Lauren's All-American Brand Had a Bummer Quarter in America

The warm winter didn't help anything.
Author:
Updated:
Original:

In the first and second quarters of fiscal 2016 (aka March through September), Ralph Lauren spent $45 million and $38 million, respectively, on company-wide restructuring, including hiring a new CEO, Stefan Larsson, in September. (Ralph Lauren, the man, then moved into the dual roles of executive chairman and chief creative officer.) That restructuring has yet to translate into significant sales growth, however, as evidenced by what Larsson called a "very disappointing performance" in the three months leading to Dec. 26, 2015, during which total sales declined 1 percent to $1.9 billion. 

Ralph Lauren's biggest problems lie in North America, where total sales decreased 4 percent due to unseasonably warm weather, a decline in tourist activity and "product assortment challenges in the Lauren brand." Meanwhile, European sales grew 6 percent even though stores in France and the U.K. briefly closed following the Paris terrorist attacks in November. Wholesale sales were another problematic area, decreasing 3 percent to $786 million, and comparable retail store sales fell 5 percent. (Thanks to new store openings and e-commerce growth, though, retail sales were overall unchanged from last year.)

In an earnings call on Thursday, Larsson said he still has a lot of work to do to "match the business performance with the strength of the brand," adding that he will have a more specific plan of action to share when the full year results are revealed in May. He likened the task ahead of him to similar challenges he faced at his two previous employers, Old Navy and H&M. "We will build Ralph Lauren into a stronger position," he said, adding that it is a "long term" endeavor. 

To that end, the company spent another $58 million on restructuring costs (and preparing for an upcoming audit) this quarter.  So when will this internal investment start to pay off for Ralph Lauren? Find out next time on Ralph Lauren: The Larsson Chronicles.