Jul 18, 2023
Ralph Lauren will keep raising prices to boost brand prestige
Jul 18, 2023
Ralph Lauren Corp. plans to keep lifting the average price of its products, a sign the US apparel company is doubling down on efforts to elevate the cachet of its brands and to sell higher-priced items such as home goods.
“I don’t think there’s a limit as long as we do a good job on elevating the product, elevating the storytelling, elevating the environment,” Chief Executive Officer Patrice Louvet said while discussing the company’s pricing plans during an interview with Bloomberg TV’s Francine Lacqua.
“The onus is on us to make sure that we are able to provide this consistent elevation,” Louvet added. “Then that will support the continued growth of average unit retail.”
Ralph Lauren says it has raised the average price of its products by around 80% since 2018, while its gross margin — a profitability metric — has also increased versus pre-pandemic.
Still, BMO Capital Markets analyst Simeon Siegel points out that the company has had “industry-leading increases” in the average price of its products but an “industry-lagging gross margin performance.”
Ralph Lauren’s gross margins in the most recent quarter were 61.7%, which is lower than competitors such as Capri Holdings Ltd. and Coach parent Tapestry Inc.
“Elevating a brand with higher price points without commanding the ensuing margins raises questions about how elevated the brand perception really is,” Siegel wrote in a research report published this month.
BNP Paribas analyst Laurent Vasilescu wrote in a recent report that he expects Ralph Lauren’s gross-margin headwinds, such as the price of commodities and the cost of freight, to ease in the coming quarters.
Growth in India
Louvet also told Lacqua that Ralph Lauren is focused on expansion in India, where the company currently has four stores. In India, Ralph Lauren is being “very deliberate on planting the right foundation so we can build from there with the right image perception,” Louvet said.
The company has also targeted growth during the past several years in China, which now represents around 6% of revenue. While that’s about double what it was several years ago, Louvet said, the portion of sales generated in China is still “quite small when you look at the penetration of the Chinese business for some of the best luxury players in the industry.”
In the next five years, Louvet is aiming for an “established, good presence in India,” as well as better distribution of stores and sales across Europe and the Western US. Also, Ralph Lauren aims to continue to expand its women’s business, including apparel and handbags.
Louvet also elaborated on Ralph Lauren’s plans for its dining and drinking locations. The company is looking to open the second outpost of its Polo Bar in London. The brand currently has a Ralph’s Coffee shop in London, one of 26 around the world. Ralph Lauren also has an RL Restaurant in Chicago; The Polo Bar in New York City and a restaurant in Paris.