Ralph Lauren CEO: Tariffs a "Factor" But Focus is on Consumer

Bloomberg

Watch Ralph Lauren CEO: Tariffs a "Factor" But Focus is on Consumer - Bloomberg on Dailymotion

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00:00You know, this company has been around for 58 years, so we have gone through many different economic, geopolitical silos, phenomenons.

00:07Of course, tariffs is a factor right now for us.

00:09We're really focused on the consumer and making sure that we're delivering to the consumer amazing value

00:15and something that's engaging from an emotional standpoint.

00:18The situation on tariffs, as you know, continues to evolve.

00:21We've run a number of different scenarios.

00:23We have a proven toolkit of how to manage cost headwinds.

00:27We've had prior cost headwinds, if you think about the price of cotton, that increased dramatically as a result of COVID.

00:34So the combination of diversified sourcing, as you mentioned up front, the fact that we have strategic partnership with a number of our suppliers

00:40where we can really work efficiencies throughout the entire chain, and then a brand that's got strong pricing power

00:46so that if and when needed, we can take selective pricing and promotional activities, I think positions us well in this environment of uncertainty.

00:53Again, all of our energy is making sure we're getting the consumer excited about our storytelling, about our products,

00:59and providing great experiences around the world.

01:01And Patrice, how is the consumer doing?

01:02So what are they looking for?

01:04Is it in terms of brand recognition?

01:06It's there.

01:07Do they want upper end?

01:08Is it middle end?

01:09Do you see a change in behavior at the margins?

01:11So it's pretty clear that around the world, and I've been traveling a lot recently.

01:15I was in China just a few months ago, and parts of Europe this week.

01:19There is a high level of uncertainty, and that's likely to continue.

01:23I think what we are seeing in general is consumers are looking for brands that are dependable, consistent, timeless.

01:31And when you look at our core consumers, which is a subgroup of the broader population,

01:36our core consumers are actually still very, very resilient.

01:39And that's true in Sydney, in Shanghai, in Milan, in London, in Los Angeles.

01:43And I think what the consumer is telling us is they really appreciate the values of authenticity, optimism.

01:53We need optimism at this time.

01:56Timelessness, aspiration.

01:58That resonates with them, and from what we are seeing, our consumer continues to be strong around the world.

02:05I mean, we went for, you know, their brands with many logos being very popular to quite luxury.

02:10You say timeless.

02:11Has it gone into a different direction where actually people want to hear stories, want to hear family stories,

02:16and has that changed?

02:17Or you're also selling, like, Americana.

02:21What does that mean to you?

02:22Yeah, I think it's very interesting.

02:24During times of uncertainty, like the ones we're in right now, we do see consumers gravitate to brands that they know,

02:31products that they trust.

02:33They're more discerning with their dollars, right?

02:35The consumer is smart.

02:37They recognize quality when they see quality.

02:40And so what's very interesting, when you look at the part of our lineup that is responding really nicely right now,

02:45it's our core products, it's our cable knit sweaters, it's our tweed jackets, it's our Oxford shirts,

02:51it's, of course, our polo shirts, it's our pony caps.

02:54So that's actually the breadth of our lifestyle portfolio is actually serving us very well here.

02:58And the core that the consumer knows well from Ralph Lauren is really resonating.

03:03Again, what's exciting about the company performance right now is the breadth of performance

03:07wherever you look, by market, by channel, by consumer group.

03:11Where do you see more opportunities?

03:13Is it in women's wear?

03:14Is it, I know you also are quite big in home wear.

03:17Right.

03:18Is it what's growing the most?

03:19So what's exciting about this brand is it's a true lifestyle brand, right?

03:22We serve generations from newborns to 90-year-olds.

03:26And we sell a pack of tennis socks and $300,000 watches and the entire ring.

03:34Our challenge, actually, Francine, is making choices with all these opportunities.

03:39But if you kind of ask me...

03:40What if you're not to be?

03:41Well, yeah, sometimes the hardest answer is no, not now.

03:45We'll do it later.

03:46Certainly, if you look at the macro numbers, the biggest opportunity for us is women's wear.

03:50So this company was built on men's wear.

03:52That's the rock of the company is the way I think about it.

03:55We have significant opportunity in women's wear around the world.

03:58We have a three-brand portfolio, collection at the high end, Polo Women's and Lauren.

04:03We're seeing really nice momentum on that business.

04:06It's about a $2 billion business for us.

04:08The total addressable market, depending on how you do the math, is $150 to $200 billion.

04:13So significant runway.

04:16And our design teams are doing a really nice job with our marketing teams,

04:20developing product and storytelling that connects particularly to that younger consumer.

04:23Nothing makes me happier than to see a young 18-year-old walk down the street

04:27with our Polo Bear sweater and a pony cap.

04:30I mean, when you talk about storytelling, is that through social media?

04:33Is it people that come in store and actually want to know about the story?

04:36Or is it other channels?

04:37So it's evolved greatly.

04:38And you and I have had the chance to talk about it over time.

04:40But from a more traditional kind of fashion show, print magazine, activations to now a broad range of programs.

04:50Sports, right?

04:51Obviously, Wimbledon, U.S. Open, Ryder Cup, Australian Open.

04:55We have great partnerships with Lando Norris.

04:57We just won the British Grand Prix with Aaron Judge.

05:00He's doing an awesome job with the Yankees.

05:02So that's part of the activation.

05:03Really focused on spectator style.

05:05Then we have a lot of activations in gaming.

05:08We do things with Fortnite.

05:10We have a number of different things going on right now in different platforms.

05:15Celebrities, right, who have an authentic relationship with us.

05:19And then there's the experience in-store and online.

05:22And what we are really focused on is to make sure we're creating this environment where you can step into your dream, right?

05:28This company is all about dreams much more than it is about apparels.

05:31And how do we create these experiences that help people think about something different than dreams?

05:37Patrice, I remember a couple of years, actually maybe two years ago, you telling me what's important about Wimbledon,

05:42because we're in full Wimbledon fever here in London, is that you turn the camera to look at the spectators.

05:49And you see that every day you have images of celebrities showing that.

05:53Is there another sport or is there another industry where you could do the same,

05:57where actually there's, you know, the fashion, luxury world and this other industry become much more powerful combined?

06:05Yes.

06:06And again, it's a question of choices for us.

06:08So we're in golf, right?

06:09We actually are the outfitter of the U.S. Ryder Cup team.

06:14We also have a number of golf players.

06:17We have opportunities that come across many different sports.

06:22We're looking at cricket as a potential opportunity.

06:24There's an important game happening today.

06:27So again, for us, the point is, where is our target consumer?

06:32Where do they want to engage with our brands?

06:33And how do we make sure we're there?

06:36Formula One, obviously, is an important area.

06:37That's why we're really excited to have this partnership with Lando Norris,

06:40who happens to be doing quite well this season.

06:42But so how do you choose?

06:43And again, I mean, Formula One is seeing a massive revival thanks to Netflix.

06:47That's right.

06:48We choose through being laser focused on the consumer we want to talk to

06:52and understanding from him and from her where they want to engage, how they want to engage.

06:59And then we make sure that what we offer is unique and distinctive and authentic.

07:04Patrice, how's the Asian consumer doing compared to the European?

07:08So there's a lot of conversations around Chinese consumers being pressured, for example.

07:12And obviously, we see that holistically, but our business continues to be quite strong across Asia.

07:20The standout is clearly China for us, 20% up last quarter, 20% up the quarter before that.

07:26I think our teams on the ground are doing a great job connecting with that consumer, that younger consumer,

07:31evolving the storytelling that's still very authentic to who we are, but really resonates with them culturally.

07:38But we're seeing that in Japan.

07:39Japan is quite strong for us right now.

07:40We're seeing that in Korea, also great performance there.

07:43We're seeing that in Australia.

07:45Now, I'm really pleased to see the work the teams are doing around the world.

07:48What's your biggest challenge?

07:49I don't know.

07:50You know, there's currencies.

07:51There are things that are completely out of your control, like exchange rates.

07:54Do you worry about them?

07:55Do you head?

07:56Or do you just, you know, it is what it is?

07:59As a philosophy, Francine, we really say let's focus on what we can control, right?

08:04Because we could spend a lot of time chasing things that are out of our control

08:07and that's not good use of our resources and our energy.

08:11But the greatest concern, I think, for all business leaders right now is the uncertainty, right?

08:16And we like to have some visibility so we can plan accordingly.

08:18And obviously, there's a great deal of uncertainty.

08:21When it comes to currencies, we guided in May that we expected currencies to be roughly even impact for the fiscal year.

08:29There's been some movement.

08:30We'll update the street when we announce our results in a couple weeks.

08:35We do hedge.

08:37We do hedge.

08:38But at the same time, we're also clear on what we can and cannot control.

08:43And I think as we've been talking, the focus for us is get the consumer excited about what we have to offer,

08:48get them engaged, and good things will happen as we do that.

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