Ralph Lauren’s strategy for the next three years could be summed up in less time than it takes to order a cup of Ralph’s coffee: Why mess with success?
The company held its first investor day in three years at the New York Stock Exchange on Tuesday at a high point for the 58-year-old brand. Sales in the fiscal year ending in March rose nearly 7 percent, topping $7 billion for the first time since 2016, and the company’s share price has nearly quadrupled since 2022.
While the core of the business is still polos, sweaters and other preppy mainstays, these items are increasingly sold out of bustling new flagships alongside handbags, outerwear and other more upscale categories. Ralph Lauren is also at peak cultural relevance, from its omnipresent logo at the US Open to the black-and-white striped dress Taylor Swift wore in her engagement photos.
On Tuesday, the company promised more of the same, only bigger. In 2022 it targeted 30 cities to prioritise investment in new stores and marketing; now it has a list of 50, including Austin, Texas and Zurich. The brand projects it can grow sales by mid-single-digit percentages annually over the next three years, putting it on course to hit $10 billion around the end of the decade. Womenswear, now a $2 billion-a-year business, is expected to grow even faster. And if it felt like Ralph Lauren was everywhere before, buckle up: The company plans to boost its annual marketing budget from 7 percent to as much as 8.5 percent of sales, or more than half a billion dollars.
Still, the company tends to couch even its most ambitious goals in the language of continuity.
“The key strategic pillars will remain pretty consistent to the past few years because the strategy is working,” said chief executive Patrice Louvet in an interview. Louvet joined the brand in 2017, and Tuesday’s presentation is the third iteration of his “next great chapter” strategy.
The market’s response was muted on Tuesday, with shares falling 0.4 percent, as presentations by a parade of executives offered few new twists on the brand’s current formula. Ralph Lauren also fell victim to high expectations; while in line with analysts’ predictions, the company’s growth projection comes after two quarters where sales grew even faster.
Still, it’s that consistency, both in terms of the brand’s codes and how they’re deployed, year in and year out, that’s at the heart of Ralph Lauren’s appeal to consumers, said Ana Andjelic, a brand executive and consultant.
“Ralph Lauren, the man, built a very distinct brand over [more than] 40 years. That’s what propels sales,” she said. “The design, the assortment, the aesthetics — nothing has changed since the ’80s. That’s intentional. It’s timeless because it never chases trends.”
The same formula has plenty of fans on Wall Street, too.
“[Ralph Lauren] has been a rare source of stability for investors during the chaotic environment for brands/retailers in recent years,” said Tom Nikic, an analyst at Needham & Company, in a research note last week.
Growing Ralph Lauren’s World
Under Louvet, there has been a steady expansion of the Ralph Lauren universe into new categories, new geographies and above all else, new price points. Average unit retail — a measure of pricing power — has more than doubled since 2018.
Many luxury brands that hiked prices over the same period have seen their sales fall as customers rebelled. Ralph Lauren has avoided this by pursuing a mix of price increases on core products, and introducing new items in categories where customers are used to paying more. It’s also opening more full-price stores, particularly in Asia, reducing the brand’s reliance on outlets and other discount channels. All of this has helped boost operating margins to 13.4 percent in the last fiscal year, the highest since the early 2010s. The company said Tuesday it intends to expand that by a further 1 to 1.5 percentage points in the next three years.
“One of the reasons Ralph Lauren is standing out right now in the industry is because of the fact that we’re not just reliant on pricing for AUR growth,” Louvet said. “We’re very focused on value perception and to make sure … the consumer consistently says, ‘This is worth it.’”
Take handbags as an example: The Polo Play tote, which was introduced this year, retails for just under $500. It fills out a range that spans from $200 clutches and canvas crossbody bags to $3,000 calfskin totes, or a version made with alligator skin for $28,000. The relative affordability — alligator bags aside — is resonating with consumers who have been recently priced out of many European luxury brands; the Polo Play in particular has become a recent favourite on TikTok, and on Tuesday chief product officer NAME said bags in the $500 to $1500 range were selling fastest. At Ralph Lauren, bag sales rose by mid-teens percentage points in the most recent fiscal year, and will be a key driver of growth in the coming years, Louvet said.
The push into bags is of a piece with other moves the brand has made to expand the Ralph Lauren universe. There are now over 30 Ralph’s Coffee shops around the world. Fashion shows have gotten more elaborate, culminating in a blowout Hamptons event last year that included runway appearances from Christy Turlington and Naomi Campbell as well as a one-night-only recreation of Lauren’s Manhattan restaurant, The Polo Bar. The brand staged its first show in Shanghai, a recreation of the Hamptons experience, earlier this year.
Bags, coffee and luxury womenswear collections are unlikely to come anywhere close to the sales generated by polos, chinos and other core offerings, which still make up 70 percent of the business. But they’re playing an essential role, especially in the current moment.
“The halo effect is very real and very strong,” Andjelic said. “And the timing is perfect — luxury brands are overpriced and uninspiring right now. So if Ralph does even a small amount of innovation … they’ll do disproportionately well.”
That halo effect will need to shield the brand from some powerful headwinds. Consumers are becoming more cost conscious, particularly in the US, where the retailers that cater to shoppers who are trading down, like Quince and T.J. Maxx, are performing best. Luxury brands will eventually recover their footing, and some will make another run at the aspirational customers that Ralph Lauren has scooped up. Quiet luxury and prep, like any trend, are only timeless until they suddenly aren’t.
There’s also Ralph Lauren’s position as the standard bearer for Americana in a world that’s turning against the US. Earlier this year, Canadians boycotted Kentucky bourbon and other conspicuously American products in protest of the Trump administration’s tariffs. Surveys show perceptions of America are plunging across much of the world.
Ralph Lauren hasn’t been swept up in the anti-Trump backlash — even in Canada — and Louvet said he doesn’t expect it will be.
“We’re in a good place because the values that Ralph stands for are universal,” Louvet said. “Authenticity, quality, timelessness, family, optimism — those are universal values so consumers connect to that.”