Ralph Lauren Corporation is a prominent American apparel company that is unwavering in its commitment to enhancing the prestige of its brands and offering higher-priced items such as home goods. CEO Patrice Louvet firmly believes that there is no limit to increasing prices as long as the company consistently improves the quality of its products, storytelling, and overall shopping experience. This aligns with the company’s strategy to elevate its offerings and support the growth of its average unit retail.
In recent years, Ralph Lauren has successfully increased the average price of its products by approximately 80%. This upward trend in pricing has also led to an increase in the company’s gross margin, which is a measure of profitability, compared to pre-pandemic levels. However, industry analysts, including Simeon Siegel from BMO Capital Markets, have pointed out that while Ralph Lauren has outperformed the industry in terms of price increases, its gross margin performance has been subpar. Siegel’s research report raises concerns about the perception of the brand’s elevation despite higher price points.
Despite these concerns, BNP Paribas analyst Laurent Vasilescu remains optimistic about Ralph Lauren’s future. Vasilescu expects the company’s gross-margin challenges, including commodity prices and freight costs, to ease in the coming quarters. This positive outlook reflects the potential for Ralph Lauren to overcome these obstacles and bolster its profitability.
Apart from its pricing strategy, Ralph Lauren is also focused on expanding its presence in India. Currently, the company operates four stores in India and aims to establish a strong foundation and improve its image perception in the country. Louvet also highlighted Ralph Lauren’s growth in China, which currently accounts for approximately 6% of its revenue. However, he acknowledged that the company’s share in China is relatively small compared to other luxury players in the industry. Ralph Lauren plans to continue expanding in China while also aiming for an established presence and enhanced distribution in India, Europe, and the Western United States over the next five years.
Furthermore, Ralph Lauren has plans to expand its women’s business, including apparel and handbags. The company is also looking to open a second Polo Bar in London, in addition to its existing Ralph’s Coffee shop locations worldwide. Currently, Ralph Lauren has 26 coffee shops globally, along with RL Restaurants in Chicago and a restaurant in Paris.
Overall, Ralph Lauren Corporation’s determination to elevate its brands and increase prices demonstrates its unwavering commitment to maintaining its reputation as a prestigious fashion label. By prioritizing product quality, storytelling, and enhancing the shopping experience, Ralph Lauren aims to strengthen its presence in key markets and expand its business in the years to come.
Useful Links:
– Official Ralph Lauren Website
– BMO Capital Markets
