America’s iconic fashion brand, Ralph Lauren, is trying to reinvent itself. As reported in the June 7th edition of the Wall Street Journal, the company’s market capitalization of about $8 billion is half of what it was three years ago. Moreover, since 2014 profit is down 50%, and the ratio of expenses to sales has increased. The company has a new chief executive officer, who comes from the more basic retailers, H & M and the Gap. He replaces the 76-year-old Ralph Lauren himself, who continues as chairman.
Markets tend to like specialization — also known as focus. Too much product array can be a factor that blurs identity. For example, one can buy a pine scented Christmas candle, furniture, linens, crystal old fashioned glasses, and period jewelry in the same store as a high end Purple Label suit. So is Ralph Lauren America’s elegant retro haberdasher or a large, elegant boutique for the household?
There are various theories reported about the company’s travails. While there is a tapestry of issues, ultimately there seems a lack of brand focus, and the company has overbuilt its distribution channels. The company distributes through department stores that offer discounts that may tarnish the famous name. Further, it sells through its own retail outlets, which are now viewed as over-extended. The rise of sportswear competitors such as “cool” H & M and the over-deployment of stores in China have also been cited as negatives. Further, excessive management layers and currency valuation that affects overseas sales have also been named. And long production cycle times suggest that the company is not quick enough to get product to market.
But against these reported technical factors should be another theory which has not been set forth: America has experienced a brutal recession and elitism is on its way out. The image of privilege — Hamptons lawn parties, Panama hats, and schoolboy rowing kit, with ultimate linkage to the British royals in the 1930s — cannot be so appealing in these economic times. While generations often repudiate the ideas, tastes, and values of previous ones, America is now seeing a massive resurgence of populism in the form of Bernie Sanders, Donald Trump, and the Tea Party of the right. Main Street is seeking revenge against authority, the so-called Eastern Establishment, and some of the in-bred professional class. And populism does not embrace high end fashion.
Indeed, some of the popular low-cost labels today are Old Navy and more recently the Japanese Uniqlo, an outdoor and sportswear brand now prominent on Fifth Avenue and Chicago’s Michigan Avenue, for example. Ironically, those firms are challenged to shift resource allocation, improve operating efficiency, and introduce product into suburbia.
Another factor is that many of today’s millennials are loaded with debt and cannot afford the Ralph Lauren brand. Mark Zuckerberg, the widely admired folk hero of Silicon Valley and founder of Facebook, with market capitalization now over $300 billion, has set a standard for the youth market: gray tee shirts and gray hoodies. What could be more plain?
What is valued by this youth market seems to be a return to basics: torn jeans, inexpensive cotton shirts, and peppy-looking running shoes — the uniform for tapping out emails at Starbucks, bristling with special apps, tall macadamia latte at the ready. And Ralph Lauren is not known for these products or lifestyle.
Even for Wall Street firms, casual dress is becoming increasingly the norm — suits are not in vogue except in some circumstances with clients. Investment bankers formerly in British cut suits, festooned with Hermes silks, will not be seen. And retiring Boomers who had earlier office jobs do not need suits anymore.
A final factor could be the White House itself, which can suggest a national mood. JFK and Jackie made a fashion statement, and Bush 41 projected gentility. These have not been priorities of the Obama administration — and they do not seem to be on the radar of Hillary Clinton and Donald Trump.
The company’s new management has a mandate for change. Cost cutting and redesign of distribution channels will be necessary, while preserving the corporate panache and the image of Ralph Lauren himself, who has done so much to make the company great.
Ralph Lauren is America’s fashion emissary in the world, an arena long dominated from Paris, Milan, and London’s Savile Row. We must wish the company well in its efforts to downsize itself. But if it requires a return to elitism to do so, we will be waiting a long time.
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