Coverage: Ralph Lauren names new CEO

The Ralph Lauren Corp. named a Stefan Larsson its new CEO this week, causing a spike in the company’s stock. But Larsson’s arrival is not causing the company’s founder and namesake, Ralph Lauren, to step back anytime soon, according to a memo obtained by BuzzFeed News.

Susan Adams of Forbes discussed how Larsson’s arrival at Ralph Lauren makes for an unlikely pair:

Can a Swedish-born fast fashion impresario revive the fortunes of a faltering American clothing and accessories empire known for its upscale dreams of country clubs and Western chic? Ralph Lauren, 75, the self-made billionaire who’s run his eponymous company for nearly 50 years, surprised the fashion world yesterday when he announced that he will relinquish the CEO’s job in favor of Stefan Larsson, 41, a veteran of Gap’s downscale Old Navy brand and discount clothing purveyor H&M.

When Lauren first heard Larsson’s name from a Lauren board member, the New York Times reports, he said, “Why would I be looking for that? We’re building a great luxury company.” The two met for a private dinner in New York, and Lauren was still thinking, “Why am I here?” According to the Times, the feeling was mutual. “I was hesitating,” Larsson said. “Why was he interested in speaking to me?” But the two had great chemistry and Lauren warmed immediately to the idea. Said Lauren, “He’s unique as a man, a man who’s capable of building businesses and growing companies, but at the same time he’s sensitive to people’s feelings,”

That combination of sensitivity and smarts has brought great success to Larsson through his career, first at Stockholm-based discount fashion retailer H&M where he worked for 15 years, and then for the last three years, at what was a foundering brand before he got there, Old Navy, owned by San Francisco-based Gap. At Old Navy, Larsson pushed to change the strategy from what he called “clothes-by-the-pound” to a more aspirational, fashion- conscious approach.

Johanna Bennett of Barron’s laid out how Larsson could boost the brand:

Barron’s made the case this month that the maker of the ubiquitous “Polo” shirt would see its stock rise more than 20% in the next year. We expected profit margins to recover, helped by investments in technology and new products. And we liked Ralph Lauren’s plans to grow aggressively in Europe and Asia. North America now accounts for two-thirds of revenue.

Given Larsson’s arrival, we’re even more bullish. Granted, it may seem odd matching an executive whose success at Old Navy and H&M harkens to the rising popularity of cheap-priced “fast fashion” with a brand that has come to epitomize masculine style for the country-club set.

Yet Ralph Lauren has its eyes set on expansion, even as it struggles to shore up sales against rising competition. And Larsson has the requisite skills. Besides being highly regarded for his product merchandising and marketing abilities, he has extensive international experience. And most importantly, Larsson gets results.

Larsson expanded H&M’s “cheap chic” fashion business and turned a once dowdy Old Navy into a sales powerhouse within three years.

Ralph Lauren, 75, built his company into a multibillion enterprise. His decision to hand over the reins to an outsider acknowledges that a more seasoned hand is needed to expand overseas and into new merchandise markets.

With sales of just over $7.6 billion last year, Ralph Lauren sells clothing, accessories, home goods and fragrances through its own retail stores and to Macy’s, Saks and other department stores. Products, including Polo and Chaps, span the spectrum from exclusive to inexpensive.

Heavy spending on technology and a restructuring aimed at making the company more agile have pressured profit margins for the past three years. But Wall Street’s patience came to an end this year as the company found itself struggling against heavy discounting by rival retailers and a strong U.S. dollar that dimmed the spending power of foreign tourists shopping on U.S. soil.

New York Times’ reporter Hiroko Tabuchi described how the company’s stock has fluctuated with the news:

Ralph Lauren stock surged 14 percent in trading on Wednesday, as the markets appeared to welcome the clarity that the move seemed to offer on the fashion house’s succession plans. Mr. Larsson is a rising star in retailing, most recently credited with turning around Old Navy, Gap’s low-cost brand.

(Ominously for Gap, its shares spiraled almost 6 percent lower, over concerns that the company was losing its standout executive. Gap has announced that Jill Stanton, Old Navy’s vice president for global product, will succeed Mr. Larsson in an interim leadership role until a permanent replacement is named.)

The leadership change at Ralph Lauren is seen as a bid by the company to get its financial house in order. Its stock had declined by about 40 percent within the last year. The move may also signal the company’s willingness to learn some tricks from mass labels like Old Navy in response to pressure from a stronger dollar and tougher competition in luxury retailing.

Despite stepping down from his CEO position, Lauren declared in a memo Wednesday his role would change little, according to Sapna Maheshwari of BuzzFeed:

Ralph Lauren, the designer and founder of the namesake brand, made headlines after naming a new CEO to Ralph Lauren Corp. yesterday. But he wants to be clear that he’s still very much holding the reins.

In a letter to employees today obtained by BuzzFeed News, Lauren said he wants “to be clear about what this means for my role and lay to rest any misconceptions about what some of the press reported yesterday.”

“The Ralph Lauren Corporation is the company I founded, nurtured and love,” the 75-year-old wrote. “I am not stepping down, nor am I stepping back. I am stepping up.”

The full memo is included below.

The company said yesterday that Stefan Larsson, the global president of Gap’s Old Navy and a leader at H&M before that, will become CEO in November and report to Lauren. Lauren will “continue to actively drive the company’s vision and strategy” as executive chairman and chief creative officer, according to a statement.

The executive may be feeling slighted after Ralph Lauren’s stock, which fell more than 40% this year through yesterday, jumped after news of Larsson’s appointment. Many outlets reported that Lauren is stepping down and that Larsson is “taking over.”