Bulletin
Investor Alert

New York Markets Close in:

Feb. 5, 2021, 7:33 a.m. EST

Ralph Lauren cutting 30% of North American corporate office space, shuttering stores around the world

Tonya Garcia

Ralph Lauren Inc. (NYS:RL) said Thursday that it plans to cut up to 30% of its North American corporate real estate, reduce some space in Europe and Asia, and shutter up to 10 stores around the globe.

Ralph Lauren is also taking a look at its distribution centers in order to consolidate operations for sustainability and efficiency purposes.

Taken together, the luxury lifestyle brand expects gross annualized pre-tax expense savings of approximately $200 million to $240 million.

Read: Levi made its name in jeans but says that will be less of its business in the next 10 years

The moves are the latest in a years-long effort to strengthen brand health, increase appeal to younger shoppers, and grow the business.

Ralph Lauren reported fiscal third-quarter adjusted earnings per share of $1.67, beating the FactSet consensus for $1.63. Revenue was $1.433 billion, down from $1.751 billion last year and missing the FactSet consensus for $1.472 billion. Digital sales were up more than 20%.

Ralph Lauren Chief Executive Patrice Louvet highlighted the virtual experiences the company launched at flagship stores in Beverly Hills, New York and Paris on the earnings call, saying that digital traffic to these stores was eight times more than the physical foot traffic during the quarter.

A Hong Kong digital flagship was also launched during the quarter.

Among other online stores is the new Ralph Lauren Vintage, which sells one-of-a-kind pieces, including clothing and objects. The shop comes at a time when secondhand apparel sales are surging, particularly among younger shoppers and those concerned about the environment.

See: Poshmark takes inspiration from old-school retail to create an experience for the future

And: The shift to thrift: COVID-19 propels an already surging secondhand clothing market

Fashion blog UrbanDaddy says Ralph Lauren pieces are among the “most sought-after pieces on the secondary market,” a driver of the label’s continued relevance.

Despite the positives, Neil Saunders, managing director at GlobalData Retail, maintains that the digital results are underwhelming.

“While this appears respectable, it needs to be placed in the context of rival brands posting very high double digit and even low triple digit growth. Within North America digital sales grew by 10% which, quite frankly, is a lamentable rate of growth relative to the market and underscores the fact that Ralph Lauren is losing share online,” he wrote.

“If the company was very mature online, then the more moderate uplifts would be understandable. However, it is not; if anything, Ralph Lauren is one of the weaker retail and fashion brand players in the digital space.”

BMO Equity Research is more upbeat.

“We continue to applaud management’s focus on elevating the brand/quality of sales, evidenced by the 15th consecutive quarter of AUR [average unit revenue] growth,” analysts led by Simeon Siegel wrote.

BMO rates Ralph Lauren stock market perform with a $92 price target.

Ralph Lauren shares were up 2.5% in Thursday trading but have fallen 12% over the past year.

The Amplify Online Retail ETF (PSE:IBUY) has soared 150% over the last 12 months. And the benchmark S&P 500 index (S&P:SPX) is up 16.1% for the period.

A previous version of this article misstated the global cuts that Ralph Lauren is planning. The article has been corrected.

Link to MarketWatch's Slice.