- Ralph Lauren and president and CEO Stefan Larsson have mutually agreed to part ways, according to a press release issued Thursday morning.
- Larsson, who joined Ralph Lauren in Nov. 2015, will remain at the helm until May 1. Chief Financial Officer Jane Nielsen will lead the venerable apparel company’s “Way Forward” turnaround effort until a new CEO is found.
- Also on Thursday, Ralph Lauren reported Q3 profit of $82 million or 98 cents per share; adjusted earnings were $1.86 per share, besting the Zacks Consensus Estimate of $1.64, but reflecting a 18.1% decline from $2.27 per share in the year-ago quarter. Ralph Lauren’s net revenues dropped approximately 12% (11% on a constant-currency basis) to $1.714 billion, just shy of the Zacks Consensus Estimate of $1.708 billion.
Ralph Lauren is now in search of a CEO in the midst of its so-called “Way Forward” turnaround plan, which has included a pullback from department stores in favor of digital sales, flagship store sales (despite a closure of underperforming stores, some 10% of the fleet) and a move to emphasize best-selling styles as well as provide more “see now, buy now” opportunities for customers.
While ceding the role of CEO, Lauren remained at his eponymous brand as creative director and chairman and had stressed that the move was not a step towards retirement. Larsson had led Gap Inc.’s Old Navy brand, credited with improving the unit’s approach to style and speeding up its supply chain.
The choice of Larsson was fraught from the beginning, considering that he not only had little experience with a brand so dependent on wholesale (particularly department stores) but was also on record as relishing Old Navy for its low-key affordable styles — making the choice seem odd for a retailer whose logo is an embroidered polo player.
“Times are changing, and prestige is being looked at differently,” Larsson told The New York Times in 2015.“Sometimes when I shop at high-end brands, I get this look when I walk in, like people working there are screening me and asking: ‘Are you good enough to be our customer?’ I hate it. And Old Navy is as an antidote to that.”
Beyond that, Larsson was up against the company’s history, which had Lauren, with his signature American classic style — a classy cowboy vibe that reflects supreme taste, an exquisite knack for spotting trends and an outsized respect for quality — with financial gurus at his side who kept a close watch on manufacturing and the supply chain while also carefully balancing the books. One of those men, Roger Farah, would have been the better choice to succeed Lauren as CEO, according to Howard Davidowitz, chairman of New York City-based retail consulting and investment banking firm Davidowitz & Associates Inc.
"When I saw Farah leaving [in 2014], I said 'Uh-oh,'" Davidowitz told Retail Dive. "I thought Farah was the best replacement for him there was. He had worked with him for years. Give him $20 million, make him CEO. Whatever it took to keep Farah, I thought that should have been done. Bringing in Larsson with zero background with dealing with department stores to rethink the whole company, that just didn’t make sense to me. Not that he isn’t a bright guy. I give him all the credit. He was great at Gap. He was the wrong fit for Ralph Lauren from the beginning."
Larsson’s move to scale back wholesale presented the brand with a tricky problem: While department stores are “wrecked,” according to Davidowitz, and have resorted to promotions to move merchandise in the huge spaces dedicated to Ralph Lauren’s brands, the fact is that they’re also a significant source of profits, pulling in 44% of the company’s revenue.
"At the core Ralph Lauren is a wholesale business. [Larsson] had no experience with that," Davidowitz told Retail Dive. "And this is a business built around Ralph. It would have been difficult for anyone, but much more difficult for Larsson, who was stepping into something totally new — and a company that needed to be reinvigorated. You're Ralph, and here comes this guy who wants to change everything. This was inevitable, if you think of it."
In any case, Lauren and Larsson haven’t managed to see eye to eye, the former indicated in a statement released Thursday.
“Stefan and I share a love and respect for the DNA of this great brand, and we both recognize the need to evolve,” Lauren said. “However, we have found that we have different views on how to evolve the creative and consumer-facing parts of the business. After many conversations with one another, and our Board of Directors, we have agreed to part ways. I am grateful for what Stefan has contributed during his time with us, setting us in the right direction with the Way Forward Plan.”
The Way Forward plan remains in place, the two men said.
“In June, we announced a plan to refocus the company on what made it iconic, evolve that for today and build our brand to its full potential,” Larsson said in his statement. “That plan is on track — I am proud of the progress the whole team has made and I am committed to ensuring its uninterrupted execution. Ralph will always be an inspiration to me, and I am grateful to have had this experience.”