As online and fast-fashion retailers prevail, both Ralph Lauren and Michael Kors are gaining ground by re-establishing themselves as luxury brands.
Traditional retailers continue to grapple with online and off-price competition, and many are losing the fight. However, fashion brands Ralph Lauren and Michael Kors have improved their performance with strategies aimed at anchoring them to the luxury segment, which has fared better than the retail industry as a whole.
Ralph Lauren, which reported better-than-expected quarterly results, has been focusing on its inventory; specifically, pulling back inventory from department stores in order to distance itself from discounting and restore its brand cachet. Under new Chief Executive Patrice Louvet, who was appointed in May, Ralph Lauren’s inventory levels fell by 31% in the first quarter. In the second half of the year, the company plans to pull back inventory from 20% to 25% of US department stores.
Becoming more accessible may have backfired. “It simply isn't credible for a high-end brand to simultaneously showcase itself in a glitzy store on Madison Avenue, while at the same time hawking a random assortment of sweaters thrown in a ragtag way on a table in Macy’s”, said Neil Saunders, Managing Director of research firm GlobalData Retail.
Louvet said that he wants to build on initiatives put in place by his predecessor, Stefan Larsson. “We are looking at these three buckets: Our own sites, our wholesale.com and pure plays”, he said, adding that the company is actively looking to partner with online pure-play retailers, Reuters reports. And since fast fashion isn’t going away anytime soon, Ralph Lauren is also working on getting its low-end Polo and Lauren products to shelves more quickly, from a 15- to nine-month timeframe, to help it compete with the likes of H&M and Zara.
Michael Kors, most often associated with the affordable luxury category, has found itself in a similar position to that of Ralph Lauren. With shoppers continuing to migrate to online stores en masse, Michael Kors has suffered an eight-quarter same-store sales slump. Contributing to the difficulties, according to Reuters, “Over-distribution of its products and a reliance on promotions to boost sales also eroded some of Kors’ brand value and its appeal”.
However, as it limited promotions and sold more premium handbags, the company’s first-quarter profit was better than expected, and it lifted its revenue forecast for the year.
Michael Kors is pursuing a multi-brand strategy for growth and diversifying its product lines. The new approach was made public last month, when the company announced it will acquire luxury shoemaker Jimmy Choo. Kors is also adding more menswear and dresses, decreasing physical stores and, similar to Ralph Lauren, pulling its products from department stores. Kors said such efforts have yielded a higher average selling price per unit.