Everything You Need to Know About Ralph Lauren’s New CEO, Stefan Larsson

1 Oct 2015 | Author: | No comments yet »

Gap: Be ‘Opportunistic’ as Executive Departure to Ralph Lauren Sinks Shares.

NEW YORK: American designer Ralph Lauren, who built a fashion powerhouse on luxury designs inspired by country club chic, announced that he is stepping down as chief executive officer and named the head of Gap Inc’s populist Old Navy brand to the position.New York • Ralph Lauren Corp.’s shares extended their rally Wednesday, a day after the fashion company announced it was hiring Old Navy’s top talent to take over the CEO job. Ralph Lauren Corp, founded by 75-year-old Lauren in 1967, appointed Stefan Larsson, the global president of Gap’s Old Navy division, as CEO effective in November. Ralph Lauren, 75, who held the title, will remain as executive chairman and chief creative officer of the fashion and home decor business he created nearly 50 years ago.

Old Navy has been the single bright spot at Gap, posting a long string of same-store-sales increases amid decreases at Banana Republic and the Gap brand. Shares of the New York-based company rose 13 percent in afternoon trading Wednesday to $117.38, after climbing nearly 4 percent in after-hours trading Tuesday when the news was announced. Larsson’s impact on product, process, and ultimately performance over the past two years, and will assess how new leadership and any future key people changes could alter our longer-term constructive view of Old Navy, a critical part of our thesis.

It’s a welcome shot in the arm, considering shares have slumped 44 percent this year, more than 21 percent in just the past three months as sales growth has slowed. Odeon Capital analyst Rick Snyder said the company had grown to a size where it needed more “systems and controls.” The change in CEO “is just a natural progression,” Snyder said. The global fashion, home decor and accessories empire has been grappling with a tough economy in Europe, the impact of the strong U.S. dollar, and increased competition in the luxury business.

Milton Pedraza, a fashion industry analyst at the Luxury Institute, said Larsson’s appointment follows a trend of luxury brands hiring leaders from mass-market companies in recent months. Larsson’s influence over culture and processes is enduring and that the powerful team he assembled will continue to execute in at least the short-to-medium term. He cited the appointment of Grita Loebsack, a former vice president at Unilever Plc, as CEO of Kering’s emerging brands, which include Stella McCartney and Gucci. But Lauren told The Associated Press on Tuesday, with Larsson sitting at his side in his Madison Avenue office, that he isn’t slowing down anytime soon and he isn’t leaving.

He is credited with growing H&M sales from US$3 billion to US$17 billion and increasing its scale from 12 to 44 countries, according to a Ralph Lauren company statement. Executive bench at Old Navy is the reason strength should continue: What we believe is overlooked is the investment in best-in-class external executive hires at Old Navy, who are driving meaningful changes. 2015 only marks the second full year that this team has been influencing Old Navy’s culture, branding, processes, supply chain, and product direction, which suggests to us that there are many innings to go. Key leaders include Ivan Wicksteed, Chief Marketing Officer, formerly Global Creative Director of Coca-Cola (KO) and the driver of brand transformations at Converse and Cole Haan, and Jill Stanton, the former Head of Apparel at Nike (NKE). Lauren’s fashion empire includes some 25 brands including Polo, Club Monaco and Denim & Supply, and the company makes clothing, accessories, furniture, home decor items and footwear under its labels.

Other key players include athletic wear designers from Nike and Reebok, an accessories and bag designer from Coach (COH), and the men’s apparel director from North Face. It also shouldn’t alter Old Navy’s near-term performance: Marketing plans for the all-important holiday quarter have already been completed and merchandise has been purchased through the spring. Larsson, a Swede who before joining Gap was global head of sales at Hennes & Mauritz, brings experience of managing a fast fashion business with a supply chains considered to be among the most efficient within the apparel industry. “If he comes from a place like H&M, he understands global supply chains and that’s one of the things that Ralph Lauren is trying to implement right now,” Snyder said. “It’s going to be very positive for them.” Despite the aura of Anglo-Saxon elitism around his company, Lauren was born Ralph Lifshitz in the Bronx in 1939. We look for Old Navy benefit from strength in the denim and active categories, and for margins to benefit from inventory discipline, modest AUC benefits, the continued roll-out of fabric platforming, and benefits from store closures. Lauren’s designs drew inspiration from elite and exotic realms including East Coast prepsters, the Wild West, colonists on African safari and czarist Russia.

Shares of Gap have tumbled 5.8% to $28.48 at 1:47 p.m. today, while Ralph Lauren has jumped 13% to $117.56, Coca-Cola has risen 0.9% to $40.01, Coach has climbed 3.4% to $28.69, and Nike has gained 2.3% to $122.46. His bright colors and bold clothing became staples for some New York gangs, and rappers such as Kanye West and Lil Wayne have mentioned Lauren and his designs in their rhymes.

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