Stumbling Pony: Polo Names New CEO, Ex-Old Navy, H&M

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The Wall Street Journal has a major feature on the struggles at Ralph Lauren, whose profits are down 50% over the past two years while market value has fallen from $16 billion to $8 billion.

A new CEO has been appointed to help turn around the company, which will include closing stores and reducing discounts. It may seem odd then that the CEO Stefan Larsson, has previously headed inexpensive fast-fashion brands Old Navy and H&M.

Here are a few excerpts from the article:

Mr. Larsson, 41, is expected to unveil a new corporate strategy on Tuesday at a meeting for analysts. By his reckoning, the company has too many brands and retail stores. It is reliant on department stores, where shoppers are hooked on discounts. Its costs are bloated and its inventory system inefficient.

In an interview, he said the company will refocus on its core Ralph Lauren, Polo and Lauren labels. Fifty stores, or roughly 10% of the company’s retail footprint, mainly high-end shops, will be closed. And shipments to department stores will be reduced in the hopes that scarcity will translate into more full-price sales. Mr. Larsson also wants to slash six months from production times and strip out three layers of management.

Mr. Lauren remains the company’s chairman, chief creative officer and its single largest shareholder. He and entities controlled by his family have voting power of more than 82% of the common stock. He is one of the few designers of his generation to still play an active role in his company. And his company is one of the few design houses not to have been gobbled by a conglomerate.

The new CEO is even considering testing some ideas pioneered by online startups, such as creating a subscription service for shirts and ties and allowing shoppers to rent high-end tuxedos.

Head over here for the full story. — CC

25 Comments on "Stumbling Pony: Polo Names New CEO, Ex-Old Navy, H&M"

  1. Chewco L.P. (Offshore) | June 7, 2016 at 3:00 pm |

    “The new CEO is even considering testing some ideas pioneered by online startups, such as creating a subscription service for shirts and ties and allowing shoppers to rent high-end tuxedos.”

    Does anyone know Mr. Larsson’s address? So I can send him kindly worded death threats (written in cursive).

    But on a more formal note, I thought it would have been advisable to go the LVMH route – focus on exclusivity, runway, red carpet, celebrity endorsements. Get rid of outlet stores.

  2. I’ve been a stock analyst for years and have my own investment company. We own the stock and have added more this morning – FULL DISCLOSURE. Finance aside, this comes down to a familiar topic on this site. Are global attitudes getting away from an upscale appearance and if so, can RL adapt or do they even want to try? I recently read that JP Morgan was going business casual company wide – too bad. What next Jamie? Pot smoking breaks, as it will be legalized???

    Management at Polo seemed to indicate a return to core values, which I applaud. They have solid fundamentals and discussed a desire to put profitability over size. This is good news for owners. I have seen countless apparel companies go BK by trying to be too big.

    I believe there will be a place for respectable clothing for a long time, if not always. I obviously believe Polo will recover and be stronger due to streamlining.

  3. I think that the consolidation of the varied labels that the company currently carries is a smart move. I’ve always felt that RL was on the edge of over-reaching. For example, they shut down Rugby because it was a money pit (likely a smart move in the long-run), only to then turn around and introduce a new concept to take its place, called “Denim & Supply”, which was clearly aimed at capturing the “hipsters.” There were two major problems with this strategy: a.) Hipsters are not the type to buy Ralph Lauren products, and b.) 2014 was the beginning of the end of the hipster movement. The same misguided philosophy of Denim & Supply brought us the short-lived “American Living” brand at J.C. Penny stores across the US. There are a lot of things that the company does well, like the Polo line, and I hope that they are successful in centralizing their focus on their core business.

  4. Does RRL fall under the “mainly high-end shops, will be closed” warning label? Would they close that line of goods which I suspect is a big cost with little return. Marc Chevalier, do you have any insights?

  5. They need to get it out of Macy’s. Macy’s can’t sell a swatch of fabric that isn’t heavily marked down. Agreed, RL should focus on its core and luxury businesses. They should also close Denim & Supply and bring back Rugby.

  6. @Stefan

    Pull all oversized Pony’s! A great place to start! Consider it low hanging fruit….

  7. Supposedly men’s Rugby was TOO successful and was taking business away from Polo. Some RRL stores will be closing, but the line will remain (Williamsburg apparently does very well).

    We’ll see what happens, I agree that there’s always too much stock at Bloomie’s and Macy’s, once bought a rugby for $4.

    That company has an amazing ability to get things done, the 5th Ave flagship and restaurant were announced and complete within 2 years, while the Brooks steakhouse is…what is it, exactly?

  8. In my local mall, RL moved locations spent 6 months renovating a store, only to close the store after 8 months… they are converting it to a Club Monaco… ugh

  9. How much of the business is women’s wear? (Or is “Polo” a strictly masculine label?) I always assumed that most of the empire was based on women’s fashion and that men’s wear was the tail on the dog.

  10. Polos and khakis keep the lights on, male or female.

    Club Monaco sells Southwick-made sport coats and suits, made in USA Oxford shirts and ties, and Allen Edmonds shoes. Fine by me!

    …assuming you don’t live near J Press.

  11. John Carlos | June 7, 2016 at 10:13 pm |

    In my younger years I was a big Polo customer. These days not really. I suggest getting rid of the polo player on everything other than polo shirts. Replace with a pocket on all dress/sport shirts.

  12. NaturalShoulder | June 7, 2016 at 10:24 pm |

    I was always amazed at the ability of the brand to have some many different lines without negative effects. Men who purchased purple or black label didn’t seem to care that discounted polo shirts could be had at TJ Maxx. I used to own quite a bit of RL apparel but have not purchased anything for several years. The blue label jacket and suit I still own have some wonderful natural shoulders and fabric is high quality. I believe blue label is no longer produced by Corneliani, so I am not sure if quality has deteriorated. I hope they can turn things around.

  13. My read of the article is that most of RL’s profit comes from wholesaling to department stores and their “lower end” products. It’s the upper/glamor lines that are bleeding.

  14. F. Helbard | June 8, 2016 at 2:04 am |

    @DCG

    Who needs RL for polos and khakis when so many other firms do them just as well,
    if not better?

  15. @John Carlos

    Rem acu tetigisti.

  16. @Mazama Give the embedded audio a listen, from my understanding it’s a combination of both a changing luxury market and struggling wholesalers cheapening the brand by discounting bloated orders. It appears to me that it historically has been a company that branches out instead of changing course, but the increase in overhead has finally caught up with the wholesale profit margins. This meshes with stories I’ve heard about the company and the costs it incurs every time a new non-outlet store opens, including one about some store that needed a complete re-flooring because Mr. Lauren didn’t like the color of hardwood they had initially used. This speaks to the man’s dedication to décor and detail, which is an asset, but an expensive one.

    @F Helbard Decent quality at a decent price, reasonably classic and readily available most everywhere in the country. Taste, however it is developed, is king.

    Plus, not everyone has the luxury of being served by the first rate salesmen at J Press, and speaking of shameless plugs, hope to see you all in the store soon! Have already met some great guys who read this blog regularly, always fun meeting fellow fogeys, millennial or otherwise.

  17. Perhaps Mr. Larsson will have RL produce trendier lines as he did with Old Navy ……EGAD!

  18. Chewco L.P. (Offshore) | June 8, 2016 at 9:28 am |

    I own quite a few Purple Label items, and the quality and construction is superlative. On par with the likes of Kiton and Brioni. The Purple Label and Collection (runway) items aren’t going anywhere.

    I disagree that RL should get rid of the prancing pony. That logo alone redefined fashion and made Mr. Lauren a national treasure (and a billionaire).

    I also disagree with the consensus here regarding the BIG PONY logos. They were pure marketing genius. They were cardinally designed for tennis/Wimbledon ball boys – to make the logos visible on TV. And I guess people liked them so much that they started selling them. People liked their Team USA (Olympics) apparel too, so they started selling those as well.

    I think Mr. Lauren should follow Michael Dell’s strategy. He should take the company private and find a strategic private equity partner (he already owns 80% of the company), get rid of everything besides Polo and Purple Label (men and women), and focus on tailored clothing (“custom fit” sport shirts, polos, jackets, etc).

    Denim & Supply should be tarred and feathered. Then drawn (first), hanged, and later quartered.

  19. DCG gets it – “Decent quality at a decent price, reasonably classic and readily available most everywhere in the country.”

    If Polo RL were to disappear, the already minuscule number of men who dress appropriately would dwindle to approximately nothing. I’ve never understood why RL isn’t seen as the torch bearer in the aftermath of BB’s demise. It is (dare I say) the most democratic traditional menswear brand we have. As I see it, the only major brand still dressing men so they look respectable.

  20. I agree with DCG’s summation, but it sounds as if the new strategy will make such a statement obsolete. That’s my worry. And I do still love some PRL

  21. Scott Blair | June 8, 2016 at 1:24 pm |

    I think part of problem is that Polo isn’t considered “cool” anymore. It seems that the younger generations are flocking to new preppy brands like vineyard vines. I almost never see anyone wearing a polo horse on campus. But that whale is everwhere.

    Sure, RL will always be a luxury brand, but it still used to sell a ton shirts to the mall going set. Take that away and its profits are going suffer.

  22. Yep – just watched my niece in KY and saw a ton of whales! I asked her about the brand as it’s not huge in CA yet as far as I can see. She said it was the go to brand and they “have to” have whale stickers on their cars!!! Maybe RL should buy/fund them as I hear they are looking for investment?!? Could just be a rumor though.

  23. Marc Chevalier | June 8, 2016 at 3:13 pm |

    @Chewco L.P. (Offshore):

    Get rid of RRL? Hell no!

  24. Chewco L.P. (Offshore) | June 8, 2016 at 4:33 pm |

    @Chevalier,

    RRL should be quartered FIRST, then dragged and later hanged. Do you honestly shop there? RRL is the Black Fleece of Ralph Lauren. The pants are great, but the jackets and overall fit on everything else is… is… anachronistic (those are the kindest words I could formulate).

    The prices are on par with Polo and I am told the quality is much better.

    It’s funny how short-term Wall Street has become. Miss one earnings estimate and you make the front page. DCG was right – the fact that they opened up a 5th ave flagship, a coffee shop (inside) and a bar/steakhouse (next door) would make the avg. person assume that they are doing extremely well.

    Revenues declined by 2.8%, but profits declined 44%. An 8% reduction in staff, a minimization of departmental relationships, and a public crucifixion of expensive lines *cough* *cough* RRL *cough* (and other measures mentioned in the article) should help them beat earnings estimates.

    Pro-tip: Management usually sets projected earnings guidance lower than analysts expect. This makes people panic and write lofty WSJ articles. Then after the bar is set low, the company beats expectations; stock price shoots up, Ralph buys more cars, Ricky buys more horses, Andrew buys more hair gel. Everyone is happy.

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