Why Ralph Lauren Stepped Down as CEO of His Fashion Empire
Business + Economy

Why Ralph Lauren Stepped Down as CEO of His Fashion Empire

© Carlo Allegri / Reuters

Luxury lifestyle brand Ralph Lauren Corp. has been having a rough year in the market, and the just-announced moved to hire a new CEO to replace its eponymous founder speaks to just how challenging the current situation is.

In a news release, Ralph Lauren named Stefan Larsson, president of Gap’s Old Navy, as the company’s new chief executive. Lauren, the 75-year-old who founded the company nearly a half century ago, will remain at the company as executive chairman and chief creative officer. Larsson will report to him.

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“My job is to think always about the future of our company and how to move it forward,” Lauren said in a statement. “Stefan Larsson is exceptionally talented, and he will bring our company a fresh and exciting global perspective. Stefan and I have a strong personal bond and share a vision for the future of Ralph Lauren.”

A former H&M executive, Larsson is widely credited with reviving sales at Old Navy after he was appointed president in 2012. Ralph Lauren is hoping Larsson will carry over his previous success at the budget-conscious retailer in his new post with the more upscale apparel company.

One of the main troubles facing Ralph Lauren is the strong dollar, which has made its products more costly to consumers abroad and tourists visiting the U.S., while weakening demand among domestic consumers.

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To a degree, the brand is also struggling to hold onto its fashion credibility. When the Great Recession hit, Ralph Lauren was one of the many retailers that lowered its prices in an effort to maintain sales. Profit margins slipped, and now that the brand’s products are available in so many discount stores, it’s been losing its cachet among high-end fashion consumers.

The company has also fallen behind the times by not introducing any products that cater to the booming athleisure market. Tory Burch, one of Ralph Lauren’s biggest competitors in the luxury market, became one of the first big-name brands to enter that market by revealing a new athleisure-wear collection last month.

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The hiring of Larsson is just the latest move by the company to try to respond to a shifting retail landscape. In August, Ralph Lauren reported quarterly revenue was down 5.3 percent to $1.62 billion. The shares, which traded as high as $186.73 in December, have tumbled since then. The stock closed at $104.12 on Tuesday, but the news about the shakeup in management boosted its price almost 5 percent in after-hours trading.

Earlier this month, Barron’s cited the stock’s slide as a buying opportunity and argued that the currency effects were a temporary problem and that sales should grow as the company looks to increase its presence in the women’s apparel market, build its brand in Europe and Asia and cashes in on an investment in new trend-tracking software.