Ralph Lauren Corporation (NYSE: RL) just beat Wall Street expectations by delivering a 3% first quarter 2020 revenue gain to reach $1.4 billion in sales.
All reporting segments contributed to the boost, with its largest market North America ($719 million in sales) up 3%, Europe ($361 million) gaining 2%, and Asia ($259 million) advancing 4%. Despite a 19% spending increase in marketing, operating income compared to same quarter last year rose 7.4% to $117.1 million.
Though there were some disappoints in the quarter, notably flat results for its North American ralphlauren.com website, digital commerce in Europe and Asia grew a whopping 22% and 26% respectively. “North America digital commerce is clearly an area of intense focus for us,” said CEO and chairman Patrice Louvet in the latest earnings call.
On that front, he highlighted new investments in mobile commerce where two-thirds of digital transactions are conducted, a recently launched store-finder service on the website to allow customers to see products available locally and to book appointments, and what he described as “raising the bar in terms of quality and targeting of our email marketing.”
These, combined with new investments to elevate the in-store shopping experience through changes to store layout, lighting and fixtures, are expected to mitigate what Louvet said was a more volatile retail environment in North America. Clearly North America has been a headache, with sales off 7% in fourth quarter to finish last year down 1%.
Louvet’s five-year plan for Ralph Lauren
This encouraging news shows the value of setting a strategic plan and following through with it despite ups and downs and with modest course corrections along the way. Louvet laid it all out in last June’s investor day presentation, entitled “Writing Our Next Great Chapter.”
In it Louvet defined three guiding principles for the company: Putting the consumer at the center, elevating and energizing the brands and balancing growth and productivity.
With these as the guide, he went on to outline five strategic priorities:
- Win over a new generation
- Energize core products and accelerate underdeveloped categories
- Drive targeted expansion
- Lead with digital
- Operate with discipline to fuel growth
In the earnings call Louvet highlighted a number of key milestones accomplished toward those goals, including:
- A new “Family Is Who You Love” and Pride campaigns recognizing the diversity of modern families;
- A major global citizenship and sustainability program introduced with an Earth Polo shirt made from recycled plastic bottles;
- Strong momentum in its underdeveloped denim and outerwear categories with the pace picking up in those areas for this coming fall/winter;
- 13 new store openings in Asia; and
- Continued cost discipline that enabled the company to increase its marketing investment and expand its global retail presence while delivering increased operating profit and margin.
In just two years on the job, Louvet has brought vision, determination and a self-effacing style that complements and enhances the talent and vision of the company founder, Ralph Lauren.
Before Louvet came on board, the company suffered a bumpy 15 months with Stefan Larsson as CEO. In July 2017 Louvet came in from P&G with no fashion experience, but a boatload of turnaround and branding experience.
He brought a much needed calm to the corporate culture and has empowered his team to reach higher to achieve both their personal and corporate goals. His quiet confidence in this, his first CEO role, has been an inspiration to all.
To an outside observer, Louvet hasn’t made it easy to get a fix on what makes him tick. Unusually reticent as a corporate CEO, he doesn’t readily make himself available to the media.
That’s a shame, because in the one in-depth interview I found with him, he was the kind of CEO we need to hear more from. Conducted in December 2016 while he was still working as P&G beauty group president, interviewer Ray Cao, Exact Media, caught Louvet mere months before he took this important next step in his career.
In this interview, Louvet reveals the personal and professional qualities that made him such an attractive candidate for Ralph Lauren. It lets us be a fly on the wall to what must have been said in Louvet’s interviews that led to his appointment.
The man behind the title
The 55-year old Louvet grew up in France, but spent the pivotal years from nine through 13 in the U.S. after his father was transferred to the Princeton office for the French chemical company he worked for.
Returning to France, Louvet completed his education and earned an M.B.A. there in 1986 at ESCP Europe, as well as a second M.B.A. from the University of Illinois in 1987. He credits his family with instilling in him the importance of integrity, being trustworthy and responsible. He also says his mother, in particular, gave him an interest in others.
“I enjoy discovering new areas and being constantly challenged,” he said. This is what drew him to marketing. “I thought marketing was going to be the broadest path I could operate in.” But before starting his business career, he did mandatory two-year service in the French Navy, where he got an extra dose of discipline and experience as team leader.
An early and impressive accomplishment was writing a business book about importing French products into the U.S. that provided funds for his first year’s tuition. His tuition for the second year was covered by a teaching assistant’s job.
Louvet found a calling. “I’d like to teach at some point. That’s one of the things I enjoy. That is part of my day-to-day job to teach the people I work with and help them grow and develop. ”
That is also one of the things that attracted him to P&G: its focus on training and personal development. “This is a company that is dependent on the success of its new hires. Because with very few exceptions, [P&G] relies on new hires to be our future leaders 20-to-30 years down the road,” he shared. Those new hires were given a “push into the pool” by getting significant responsibilities early on, with needed coaching and support to deliver results.
Obviously Louvet rose to the challenge, moving step-by-step up the ladder there. “I wanted to go as far as my capabilities can carry me, but more so to see what impact I can make and how can I help my organization make progress versus a selfish drive to edify my ego. So I’m pretty ambitious, but I try to keep my ego in check,” he added.
It wasn’t always smooth sailing, either. He was tested when he assumed the general manager’s position over P&G’s health care business in Japan, a cultural change both personally and professionally he and his family hadn’t prepared for.
“I came in and went after a lot of things at the same time, upgrading packaging, upgrading product, changing the brand portfolio, overhauling the innovation program, making a number of staffing changes. It was a lot of change in a relatively short period of time,” he said. “This was my first general manager job, so I was eager to be successful.”
Then about six months into the job, a female executive who worked for him came to say things were not working out. “It was very courageous for a woman to speak up to her boss like that because women in Japan are deferential and incredibly respectful. So I decided to pivot and take a step back and realized that I was writing too much change too quickly.”
He learned the hard way that he had to navigate the corporate culture before he could change it. “There are any number of learnings from this experience. I learned the importance of driving a clear vision and taking the time to build connections with team members and also the importance of focus.”
Prepared for the challenges at Ralph Lauren
Louvet’s nearly 30-year career with P&G provided the training ground to assume the even greater challenges and responsibilities at Ralph Lauren. Among the lessons learned is a devotion to team work and team building.
“My life purpose is to enable people I interact with, whether that’s my family, my friends or my colleagues, to leverage their full potential. One of the things that helped me throughout my career and with the organizations I lead is to focus on making them successful. If they’re successful, I’m automatically successful,” he said.
To build the culture of team work, Louvet also believes in listening. “There’s a Chinese saying that I love and use quite often. ‘We have two ears and one mouth so that we can listen twice as much as we speak.’ I invest a lot in listening.”
He also credits his international experience with helping prepare him for the new global business reality. “It’s having the ability to operate in difference cultures, in different business contexts, the ability to decipher different behaviors through a cultural lens is fundamental,” he said.
His heightened awareness of the importance of corporate culture for success extends to his awareness of aligning corporate culture to the culture at large.
“It’s important to be in the market, to be in touch wih the teams in the market and to visit the stores and meet with consumers,” he says adding, “P&G has a reputation, partially warranted, of being a bit insular. But I feel I have had an opportunity to be more in touch with the outside world and what’s happening in other industries and in other worlds.”
No doubt, Patrice Louvet has the professional qualifications to lead Ralph Lauren Corporation into the future, but the same could have been said of his predecessor Stefan Larsson.
But what Louvet has that Larsson apparently did not is a lifetime of personal experiences and temperament that the company needs to take it forward. He has written the next great chapter for Ralph Lauren and I can’t wait to see the even greater next, next one for him and the company.