The Signal Interview
When Ralph Lauren named Patrice Louvet as its chief executive in 2017, the preppy clothing brand’s same-store sales had fallen for nine consecutive quarters.
Stefan Larsson, Louvet’s predecessor, had arrived with a stellar reputation, having helped build H&M into a fast-fashion trailblazer and revived Gap’s Old Navy brand. Larsson cut headcount at Ralph Lauren, closed underperforming stores, and pulled back from non-core businesses. But he lasted less than two years. On his way out, Larsson said of Ralph Lauren’s eponymous founder, executive chairman, and creative director: “We worked hard to find common ground, but we didn’t.”
Louvet’s initial goal, he joked on a Semafor stage at the launch of The CEO Signal in Davos last week, was just “to last a little longer than my predecessor.” Louvet had spent nearly three decades at Procter & Gamble, where he ran the beauty and haircare division, and his lack of fashion credentials left analysts asking whether he would fit in. Almost eight years later, though, Louvet has made the decades-old brand relevant again, engineered a financial turnaround, and smoothly managed the delicate challenge of working for a founder whose name is on every item he sells.
Shares in Ralph Lauren (largest shareholder: Ralph Lauren) are up more than 270%, and the executive who once sold Olay moisturizer and Pantene shampoo for P&G is dapperly dressed in a brown suede sport coat from its Purple Label collection, with a matching waistcoat and a necktie. Ties are coming back, he says. “I think style is back.”
Back in style
When Louvet joined, he asked “Is Ralph Lauren still relevant?” The brand had lost confidence in itself, he concluded. Its founder had begun by selling ties for two-and-a-half times the price of those made by Christian Dior. But in its search for scale, his company had diluted its luxury position, distributing too widely and promoting too heavily. When Louvet sat down with its e-commerce team, he asked pointedly, “Is our brand name Ralph Lauren, or is it 50% off? Because I can’t tell on our website.”
He began by crafting a lofty statement of corporate purpose (“To inspire the dream of a better life through authenticity and timeless style”), which he says provided a clarity that had been missing.
Next came a mantra borrowed from his former CEO at P&G, A.G. Lafley: “The consumer is boss.” In his old industry, this sounds like a statement of the obvious, but the fashion business has not been known for focusing on its customers, Louvet says. “It’s very much driven by the vision of the designer, and if you like what I do, great. If you don’t like it, you really don’t get it.”
Ralph Lauren has won back younger consumers by “showing up where they want to engage with brands like us,” he says — the key cities where they shop, the live sporting events they watch, and the video games they play. A sophisticated consumer research team, with scores of data scientists monitoring various brand health metrics, has also helped.
Cutting the brand’s US wholesale distribution by two-thirds to focus on its own stores and e-commerce operations has meanwhile had the dual benefit of giving it a closer relationship with its consumers while dramatically reducing discounts.
Promotions and productivity
Taking a brand upmarket once it has lost its luxury luster is notoriously difficult, and Ralph Lauren’s “elevation journey” has required serious investment. Louvet has doubled its marketing budget to 7% of sales, and says “that is not a ceiling.”
A brand that once relied on fashion shows and New York Times ads to drive demand has been plastered all over the Paris Olympics, Wimbledon, and the Australian Open. Despite the cost of such splashy promotions, operating margins have roughly doubled on Louvet’s watch.
“We’re in the brand business,” he says. “We were not competitive relative to our peer set... So honestly, it wasn’t a choice.”
Louvet has significantly increased the average unit price (his suede sports coat retails for $3,795). At the same time, he has been uncompromising in his search for savings.
“I was new to this industry, and there were a lot of sacred cows,” he says. When he announced plans to require every supplier to submit an RFP to keep doing business with the company, colleagues told him he could not touch the florist who had supplied its shops, offices, and fashion shows for 30 years. (“Ralph loves them. They’re the only ones that understand us.”)
“As you can imagine, that was incremental fuel for us to go after the flower supplier,” Louvet smiles. The incumbent won the bidding, but cut his rates by 30%. “I used that as an example to say, ‘Listen, we can get productivity everywhere,’” he says.
Training for Trump
Louvet started during Donald Trump’s first term and he is optimistic that the second one will herald a more free-spending US consumer. But the president has also threatened to impose tariffs on the imports on which even a brand as American as Ralph Lauren depends. The key to navigating that, Louvet says, is “agility,” which means diversifying its sourcing and growth drivers. Under Louvet, the percentage of Ralph Lauren’s supplies coming from China has plunged from more than 50% to about 5%.
“We’ve gone through tariffs. We experienced this in the first Trump administration,” he says. “We didn’t wake up yesterday going, ‘Oh, shoot. What’s going to happen to tariffs?’ We’ve been working on this for quite a while.”
Ralph Lauren is no longer dependent on one market, one distribution channel, or one consumer group, he elaborates, “because we know we’re going to be dealing with uncertainty.”
Founder Fridays
Louvet, a former aide-de-camp to a French admiral, speaks with diplomatic admiration of his chairman’s continued curiosity, but the circumstances in which he got his job clearly showed him the traps into which CEOs working for founders can fall.
Before he signed his contract, he would escape his P&G office to spend Friday afternoons at Lauren’s estate in Westchester County, New York, “making sure we had a common vision for the company and making sure we have common values.”
From the start, Louvet has had no pretensions to dictate designs to Lauren, who has, in turn, been clear that the details of earnings “may not be his forte.” Their day-to-day dealings now are marked by a “give and take,” Louvet says, but there is another key to their continued rapport.
“When we’re not traveling we have lunch once a week for three hours,” he says. “I need my assistant to pull me out at 3 p.m. because we could spend the whole day talking.”