Stefan Larsson is bringing his Old Navy playbook over to Ralph Lauren, as the CEO seeks to speed up the amount of time it takes the brand’s fashions to hit the shelves.
Meanwhile, the company said it will trim about 8 percent of its full-time head count and close more than 50 stores, in restructuring moves that are expected to save the brand up to $ 220 million annually. But not before some short-term pain.
In the fiscal first quarter, the company expects revenue to decline at a mid-single-digit rate. For the full year, it expects sales to decrease at a low-double-digit rate as it reduces its inventory levels, closes stores and faces continued weak traffic at its locations. That guidance excludes the restructuring and inventory charges associated with its latest restructuring activities.
Shares of Ralph Lauren were down roughly 3 percent Tuesday afternoon.
“They’re doing all the right things,” Jan Kniffen, CEO of J. Rogers Kniffen Worldwide Enterprises, told CNBC. “The question will be can they get it executed.”
Larsson, who was named CEO of Ralph Lauren in September, lifted the lid on his plan to reignite sales growth at the specialty apparel brand on Tuesday, at the company’s first-ever analyst day. Several of the initiatives paralleled the tactics he used to catapult Gap’s Old Navy brand under his leadership.
They include cutting back on the time it takes a product to go from design to store shelves and improving the company’s sourcing capabilities.
Larsson outlined how the company now uses 15-month lead times, meaning that it takes more than a year for its designs to be created and put in stores. As a result, it’s planning and buying a season’s assortment before the prior year’s merchandise goes on sale, causing it to improperly forecast supply and demand.
Over the past three years, Ralph Lauren’s sales have risen 7 percent, compared to an inventory build of 26 percent. That imbalance has led to more promotions and a skewed focus on outlet and other discount channels.
The company will now cut its lead times to nine months, which will enable it to better forecast demand, Larsson said. It will also strengthen its vendor relationships to make this lead time a moving target, and allow it to order certain merchandise closer to its selling date. Through these strategies, the goal is to sell more with less inventory on hand, the CEO said.
“We see a really clear plan to tap into the [company's] business potential,” he said.
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