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Analysis: Ralph Lauren moving in the right direction

Ralph Lauren has kicked off its new fiscal year with a solid set of results that are a marked improvement on the prior quarter. Easier comparatives aided the better growth figures, but so too have the various strategies the company has put into play over the past year. Those initiatives are also delivering for the bottom line where net income rose by a respectable 7.4% over the same period last year.

One of the recent success stories at Ralph Lauren is the elevation in marketing which has been designed to reaffirm the status of the brand, not just with traditional consumers but also among younger shoppers who might be less familiar with the offering. Our own data shows that this is working as both awareness and affinity with the under 35s has picked up significantly in the past half-year. Conversion and spend, however, remains weaker among this cohort, so the next step for Ralph Lauren is to move younger consumers beyond buying the occasional fragrance item and into more comprehensive buyers of the brand. With some of the product changes being made, we believe this shift is possible.

Changes to marketing have been supported by a more disciplined approach to product development. One of our past complaints about Ralph Lauren is that the brand has been confused by an enormous assortment sold across a variety of channels covering all parts of the price spectrum. Although we would argue that there is a lot more work to do in refining some of the sub-brands, we applaud the efforts to pull back from off-price and some department store channels, both of which undermined the premium status of the brand. This progress is reflected in customer ratings for quality and fashion perceptions which are steadily ticking up after years of erosion.

The above noted, we still believe that Ralph Lauren has much further to go in creating compelling assortments and ‘must-have’ products. Current ranges are undoubtedly stronger, especially in the Polo sub-brand, but there is a need for more initiatives such as the Rugby Bear capsule which added a unique twist to many traditional products. In our view, Ralph Lauren should also look to niche players like Kiel James Patrick and replicate the way they regularly drop exciting new lines and collections which resonate strongly with their customer base.

Another area of progress has been digital where Ralph Lauren is now delivering solid sales numbers. Digital is important for all retailers, but for a brand of Ralph Lauren’s scale and scope it is a particularly important ‘shop window’ to promote new lines: digital is the one place where Ralph Lauren should be able to showcase the full breadth of its offer in a coherent way. As much as the site is benefitting from higher levels of traffic, we would argue that more could be done to create a distinct proposition for the various sub-brands. Although some, like Double RL, have differentiated landing pages, there is a tendency for the products from all brands to merge together in a way that makes the site challenging to navigate.

Looking ahead, we maintain our view that Ralph Lauren is a company in transition. However, we also believe that a tipping point has been reached in the recovery which will allow the brand to gain momentum over the remainder of this fiscal year. This will be visible on both the top and bottom lines, the latter driven by continued efficiencies across the supply chain and other areas. Overall, the business is moving in the right direction.
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