RALPH LAUREN CORPORATION

Ralph Lauren Corporation is galloping at a faster clip than when its namesake founder first entered the arena more than 45 years ago. With golden mallet brands such as Polo by Ralph Lauren, Chaps, RRL, Club Monaco, and RLX Ralph Lauren, the company designs and markets apparel and accessories, home furnishings, and fragrances. Its collections are available at nearly 11,500 locations worldwide, including many upscale and mid-tier department stores. (Macy's accounts for 25% of all wholesale revenue.) The company operates about 435 Ralph Lauren and Club Monaco retail stores worldwide as well as eight e-commerce sites. American style icon and CEO Lauren controls the company.

Geographic Reach

Based in New York, Ralph Lauren operates in the US, Canada, Europe, Japan, South Korea, China, Southeast Asia, and Latin America. The Americas account for about two-thirds of sales, while Europe and Asia generate 21% and 12%, respectively.

Operations

As part of its business, Ralph Lauren operates through three segments: Wholesale, Retail, and Licensing. It generates wholesale sales from major department stores and specialty shops throughout North America, Europe, Asia, and Latin America. The company also sells directly to consumers through retail stores in North America, Europe, Asia, and Latin America; through concession-based shop-within-shops located primarily in Asia and Europe; and via its retail e-commerce channel in North America, Europe, and Asia. Ralph Lauren also licenses to 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, and fragrances in specified geographical areas for specified periods.

Strategy

In recent years Ralph Lauren has expanded its business through acquisitions, extended the reach of its retail operations, and experienced organic growth. Its accessories business rivals European competitors as a luxury brand, thanks to strategic partnerships with licensees including Richemont SA (to form Ralph Lauren Watch and Jewelry Co.) and the Italian eyewear giant Luxottica Group, which designs, manufactures, and distributes Ralph Lauren-branded prescription frames and sunglasses. Luxottica's US arm also makes Club Monaco-branded prescription frames and sunglasses sold in the US and Canada. Other major licensing partners include Hanes (under garments and sleepwear), L'Oréal (fragrance), and Warnaco (Chaps sportswear). With its products available in every section of a department store -- there's even Ralph Lauren paint at Home Depot -- the company remains profitable as a leader in the fashion and retail industry. Macy's accounts for a quarter of Ralph Lauren's wholesale sales. By mutual agreement, Ralph Lauren and JC Penney, which markets mid-priced American Living-branded clothes and housewares through a partnership with the upscale brand, ended their relationship effective in Q4 fiscal 2012. Ralph Lauren is able to bring its classic American style to the global market as an official outfitter of the US Olympic and Paralympic teams. It has counted on its association with the Olympics to translate into millions of dollars in sales of Olympics-branded apparel and accessories. Most recently, RLC dressed the US Olympic team for the 2014 Winter Games in Sochi. Outfits for the US team for the 2016 Olympic Games in Rio are already in development. (The company also dresses the on-court officials at the US Open and Wimbledon tennis tournaments.)

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.

Sales and Marketing

Ralph Lauren, which in fiscal 2014 (ended March) spent $256 million (up from $217 million in 2013) on advertising and promotions, sells its branded products worldwide through nearly 11,500 doors. Its primary wholesale businesses sells Ralph Lauren products to leading upscale and mid-tier department stores, specialty stores, and golf and pro shops, both domestically and internationally. Some 45% of its licensing revenue in fiscal 2014 was earned from four licensing partners: Hanesbrands, Luxottica Group, Peerless, and L'Oreal.

Ralph Lauren sells its products through eight e-commerce sites, as well, that are operated by wholesale customers. Ralph Lauren primarily wholesales menswear, womenswear, childrenswear, 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 Latin America, wholesale products are sold in department stores and specialty stores. 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 and Asia.

Financial Performance

Ralph Lauren Corp. (RLC) reported revenue of $7.45 billion in fiscal 2014 (ended March), a 7% increase versus the prior year. (Excluding the effect of foreign currency, revenue was up 8%.) Net income rose 3% over the same period to $776 million. The increase in sales was primarily due to rising retail and wholesale sales, which increased 5% and 11%, respectively. Licensing revenue declined by 9%. Online shopping fueled retail sales, offsetting declines in same-store sales at retail stores. The company's store count grew from 882 freestanding and concession shops in fiscal 2013 to 936 in 2014, and the number of e-commerce sites increased from seven to eight. Wholesale revenue got a boost from the acquisition of previously licensed businesses, including the Chaps Menswear Business acquired in 2013 and certain businesses acquired in Latin America in 2012. The decline in licensing revenues primarily reflected the transition of certain licensing agreements, including the Chaps Menswear Business and the Australian and New Zealand Business, to wholly-owned operations and the termination of certain Home licensing arrangement, partially offset by higher apparel and fragrance-related royalties.

Fiscal 2014 marked the fourth consecutive year of rising sales and profits for RLC, which, despite a small decline in sales in fiscal 2010, has proved quite resilient during a difficult period for many retailers. Profitability has risen due to higher net sales and increasing income from continuing operations.

Mergers and Acquisitions

In 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.

To give the apparel maker more control of its operations in Asia, Ralph Lauren has been buying out its licensees. 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.

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RALPH LAUREN CORPORATION


9 Polito Ave
Lyndhurst, NJ 07071-3406
Phone: 1 (201) 531-6000
www.ralphlauren.com

STATS


  • Employer Type: Unknown
  • Senior Director Info Tech Scr: Andrew Carroll
  • Vice President Of Operations: George Clopton
  • Senior Director Global Bus Intelligence: Himanshu Shekhar

Major Office Locations

  • Lyndhurst, NJ

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