Preppy people are abandoning one of their cornerstone brands
Ralph Lauren is struggling.
Sales were down in its most recent quarter. Retail revenue dipped 3%, consolidated comparable sales declined 6% on a reported basis, and wholesale revenue declined 5% — something that shouldn't be too surprising, considering how many department stores — from Macy's to Nordstrom — have reported negative comparable sales in recent quarters.
And, as Bloomberg's Kim Bhasin has pointed out, it is losing its positioning with preppy shoppers.
Here are three reasons Ralph Lauren is losing its status.
Macy's has become notorious for messy stores and discounted apparel, which doesn't help luxury brands who sell products there.
"While Ralph Lauren has representation in stores like Macy's the fact that its sales areas look like a flea-market do nothing to help the brand or its revenues. This is further exacerbated by the generally weak customer traffic at department stores across the past few months," Håkon Helgesen, retail analyst at consulting firm Conlumino, wrote in a note to clients.
"In our view, decisive action is needed to put the brand on the right track. This includes withdrawing from department stores like Macy's which, in our view, are now actively damaging the Ralph Lauren brand, and focusing only on more upscale department stores like Nordstrom and Neiman Marcus as sales channels," he wrote.
Macy's is working to fix its problems; it is currently eliminating about 100 of its own stores.
See the struggling department stores of 2016 below: See Gallery
2. Preppy people have new brands to buy
Helgesen points to Vineyard Vines an example of a preppy brand that has captured consumers.
The company uses real people in its catalogs, as opposed to models. Its strategy is paying off. In May, Reuters had reported that the company was looking to sell a stake to Goldman Sachs in May, which would make it worth $1 billion. When Business Insider spoke to the brand, they declined to comment on those financials.
Bhasin points to Smathers & Branson and Southern Tide as two other up-and-coming preppy brands that have managed to capture consumers.
3. It isn't relevant to young consumers
Helgesen likens Ralph Lauren's woes to those of Tiffany & Co., another brand that has struggled to be relevant to young consumers who demand speed and newness.
"Reconnecting with younger consumers is also a priority. Rather like Tiffany, Ralph Lauren is seen as an older, established brand that, while not actively disliked, is less relevant than it was a generation ago. Spin-offs like Club Monaco and RRL have helped to remedy this, but the company needs to put more energy and effort around extending and expanding their reach," he wrote.
The company does have someone with experience with designing for the budget-conscious fast fashion crowd. This past fall, it tapped Stefan Larsson, who helped lead Old Navy through a revival (before it tumbled again — though comparable sales were flat for the second quarter of fiscal 2016) and also worked at H&M, to be its CEO following Ralph Lauren himself stepping down.
Larsson says the brand is working on fixing its problems.
"So the core for us is what we have been known for which is classic, iconic style, and how you will see that refocus and evolving the core, the work that we're doing, how you will see that is that you will gradually see it in spring 2017 and then gradually season by season you will see the core being focused on in terms of, we will make sure that we have an updated classic, iconic style that has an effortless twist that makes it current today," Larsson said on a recent earnings call.
In June, the brand announced that it would be closing 50-plus stores and laying off about 8% of its workers.
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