What’s Ralph Lauren Business Model?

Ralph Lauren Corporation designs, markets, and distributes men’s, women’s and children’s apparel, accessories, fragrances, and home furnishings. The Company’s products are sold under a wide range of brands. Ralph Lauren’s operations include wholesale, retail, and licensing.

What Ralph Lauren is doing in more details?

Ralph Lauren Corporation is a global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, footwear, accessories, home furnishings, fragrances and hospitality under such brands as Polo by Ralph Lauren, Chaps, RL Restaurant, Club Monaco, and RLX Ralph Lauren.

Its collections are available at approximately 9,000 stores, majority of which are specialty stores worldwide, including many upscale and mid-tier department stores. It operates about 550 retail stores as well as approximately 650 concession-based shops-within-shops and trades online as well.

In addition, its international licensing partners operate about 140 Ralph Lauren stores and nearly 145 Club Monaco stores and shops. The company generates approximately 45% of sales from the US.

Where Ralph Lauren is Operating?

Ralph Lauren rings up sales via three principal channels: Retail, Wholesale, and Licensing.

The company’s Retail operation, which generates about 65% of revenue, sells directly to consumers through nearly 550 retail stores and approximately 650 concession-based shop-within-shops in North America, Europe, and Asia; and via its retail e-commerce channel in North America, Europe, and Asia.

Wholesale operation which generates nearly 35% of revenue sells Ralph Lauren products to major department stores and specialty shops, such as golf and pro shops, throughout North America, Europe, the Middle East, the Asia/Pacific region, and Latin America.

Ralph Lauren’s Licensing business accounts for less than 5% of sales and sells unrelated third parties the right to operate retail stores and to use its trademarks in connection with making and selling designated products, such as apparel, eyewear, home furnishings and fragrances in specified geographical areas for specified periods. Partners include Hanesbrands, L’Oréal, and Luxottica, among others.

Where is the geographical reach of Ralph Lauren?

New York-based Ralph Lauren structures its business along geographic lines, reporting sales for North America, Europe, and Asia/Pacific. North America represents approximately 45% of Ralph Lauren’s annual sales, Europe generates more than 25%, and Asia/Pacific accounts for nearly 25%.

Of its nearly 550 retail locations, approximately 325 are factory (outlet) stores, about 60% being in the US and more than 20% in Asia and nearly 20% in Europe.

Ralph Lauren does not own any factories and depends on more than 500 manufacturers to produce its products, primarily in Asia, Europe, and Latin America. Approximately 20% of its products are sourced from China and another 20% from Vietnam.

Sales and Marketing

Ralph Lauren primarily wholesales menswear, womenswear, children’s wear, accessories, and home furnishings. Through a limited number of premier fashion retailers, the company peddles its collection brands worldwide. In North America, department stores are a major wholesale customer.

In Europe, Ralph Lauren wholesales to both department stores and specialty stores, depending on the country. Also part of its sales efforts, Ralph Lauren distributes products to licensed stores operated by franchisees in Europe, Latin America, the Middle East, and Asia.

The company markets its products through online, mobile, video, email, and social media. Its digital commerce sites present the Ralph Lauren lifestyle online, while offering a broad array of its apparel, footwear, accessories, and home product lines.

Ralph Lauren’s advertising and marketing expenses were $265.0 million, $278.0 million, and $272.8 million in 2021, 2020, and 2019, respectively.

What is Ralph Lauren Financial Performance?

Net revenues decreased by $1.8 billion, or 29%, to $4.4 billion in fiscal 2021 (ended March) compared to fiscal 2020 (ended March), including net favorable foreign currency effects of $80.7 million.

Net income decreased by $505.4 million to a net loss of $121.1 million in fiscal 2021 as compared to fiscal 2020, primarily due to a $360.6 million decline in operating income driven by COVID-19 business disruptions, a $104.2 million increase in its income tax provision, and higher non-operating expense, net.

Cash held by the company at the end of fiscal 2021 (ended March) increased to $2.6 billion. Cash provided by operations, investing, and financing activities were $380.9 million, $195.0 million, and $356.8 million, respectively.

What is Ralph Lauren Future Strategy?

Ralph Lauren has begun efforts to realign its resources to support future growth and profitability and to create a sustainable cost structure.

The key areas of its evaluation include its: team organizational structures and ways of working; real estate footprint and related costs across corporate offices, distribution centers, and direct-to-consumer retail and wholesale doors; and brand portfolio.

In connection with the first initiative, on September 17, 2020, the company’s Board of Directors approved a restructuring plan to reduce its global workforce by the end of Fiscal 2021.

Additionally, during its preliminary review of its store portfolio during the second quarter of Fiscal 2021, Ralph Lauren made the decision to close its Polo store on Regent Street in London.

What is Ralph Lauren’s Background?

In late 2015 CEO Ralph Lauren announced he was leaving the executive suite and named Stefan Larsson, the former head of Gap’s Old Navy, as his replacement. Lauren will continue his involvement with his namesake firm as the chairman and chief creative officer.

Ralph Lauren began buying out its licensees several years ago. In 2011, the company acquired its South Korean wholesale and retail distribution operation from licensee Doosan Corp. for about $47 million. It bought out its licensing partner Dickson Concepts in a deal valued at about $37 million in 2009.

Dickson was a licensee for the Polo brand in China, Hong Kong, Indonesia, Malaysia, the Philippines, Singapore, Taiwan, and Thailand. Ralph Lauren also acquired the children’s wear and golf apparel inventory of former licensee, Naigai Co. Ltd., based in Japan.

To support other high-growth business opportunities and initiatives, Ralph Lauren in 2012 began to wind down its Rugby brand retail operations.

As part of the closure plan, 13 of the company’s 14 global freestanding Rugby stores and its related domestic e-commerce site, Rugby.com, were closed during fiscal 2013, and the one remaining Rugby store was shuttered during fiscal 2014.

What is Ralph Lauren’s History?

Ralph Lauren, a suave Manhattanite, was actually born Ralph Lifschitz in the Bronx, New York. It is said that his father, Frank, an immigrant Russian housepainter and muralist, informally changed the family’s name to Lauren and inspired his son to recreate himself in the image of a mythic upper class.

After high school, Ralph, who formally changed his name to Lauren, became a salesman at Brooks Brothers and then a sales representative for Rivetz, a Boston tie maker. In 1967 he landed a job as a tie designer for Beau Brummel of New York.

The company gave him his own style division, which he named Polo because of the sport’s refined image. The next year Lauren started Polo Fashions to make tailored menswear. Partner Peter Strom teamed up with Lauren in the early 1970s.

Although its designs received critical acclaim, Polo Fashions had a bumpy start as Lauren adjusted to the business aspect of his fashion label.

Lauren’s profile rose in the 1970s when he won three Coty Awards for design and produced costumes for the movie The Great Gatsby. In 1971 Lauren adopted his polo-player-on-a-horse logo and introduced a line for women.

That year the first licensed Polo store opened (on Rodeo Drive in Beverly Hills), along with his first in-store boutique (at Bloomingdale’s in New York City). He added shoes to the lineup in 1972, licensed his womenswear line the next year, and launched a licensed fragrance line in 1978.

By 1980 Polo Fashions had become Polo Ralph Lauren. Encouraged by the success of the licensed products, Lauren led the designer charge into home furnishings, introducing his Home Collection in 1983.

He opened his flagship store in New York City three years later. The company expanded upmarket with its Purple Label and downmarket with Polo Jeans denims and a line of paints in 1996. Following the stampede of fashion-house IPOs, Polo went public in 1997.

The next year, moving to reduce expenses, the company restructured its divisions. In 1999 Polo paid $85 million for hip Canadian retailer Club Monaco to compete in the burgeoning youth market. It also opened RL, a fine-dining restaurant adjacent to its retail outlet in Chicago’s famed shopping district.

In early 2000 Polo purchased its European licensee, Poloco, for $230 million, giving the company greater control of its brand. Then, in a 50-50 joint venture with NBC and its affiliates, Polo formed Ralph Lauren Media Company to sell its products via the Internet as well as broadcast, cable, and print media.

Also that year, the company closed 11 underperforming Club Monaco locations and announced plans to shut down all of its jeans stores. To extend its European reach even further, Polo bought its Italian licensee, PRL Fashions of Europe, in 2001.

Polo Ralph Lauren inked one of the most significant licensing deals in company history — and what it considers to be a great match, to boot — in 2005. The firm paired with the United States Tennis Association (USTA) to form a four-year global partnership and was designated the official apparel sponsor of the US Open through 2008. The agreement involved, among other things, an official shirt designed by Lauren for on-court officials, co-branded US Open/Polo Ralph Lauren merchandise, and joint marketing programs. In 2006 the company entered a licensing agreement with Luxottica valued at more than $1.75 billion over a 10-year period.

The company’s agreement with the USTA gave it the momentum to seal a deal with The All England Club and Wimbledon in 2006 that extends through 2010. Polo Ralph Lauren, as part of the agreement, became the exclusive outfitter of Wimbledon — the first official designer in the 129-history of the games. Polo Ralph Lauren creates and outfits on-court officials and sells its Wimbledon collection at its freestanding stores, as well as through select retailers and Polo.com.

Initiatives for 2007 included the launch of a new group named Global Brand Concepts formed to develop lifestyle brands for specialty and department stores, including J.C. Penney’s American Living Collection. The group designs and markets new products, including accessories, home decor, and women’s, men’s, and children’s apparel.

That year Polo Ralph Lauren purchased the remaining 50% stake in Polo.com from both Ralph Lauren Media, a unit of NBCUniversal, and ValueVisions Media for about $175 million. The move gave Polo full control over its plans to develop its online presence domestically and abroad.

The company brought its East Coast lifestyle brand to Asia when it opened its first freestanding flagship store in Tokyo in 2006.

The next year Polo Ralph Lauren secured a foothold in the Japanese apparel and accessories market by purchasing the 50% balance of Polo Ralph Lauren Japan for some $23 million and making it a wholly-owned subsidiary.

The company also increased its stake in Impact 21 Co., a Japanese sub-licensee, from 20% to 97% in. Impact 21 operates the company’s men’s, women’s, and jeans apparel and accessories business in Japan.

Founder Ralph Lauren stepped down as CEO in November 2015 but remained involved with the company as chairman and chief creative officer.

During 2013, RLC brought several licensing arrangements in-house. In April 2013, it acquired the Chaps Menswear Business from PVH for about $18 million. In July, it bought the Australia and New Zealand licensed operations from its licensee for about $15 million.