Ralph Lauren CEO steps down

By

Erin Floyd

Published
Feb 2, 2017

The American label announced on Thursday the departure of CEO Stefan Larsson, citing disagreements over the company’s turnaround strategy. The announcement coincided with the release of the company’s Q3 results, which saw a 37% drop in Q3 earnings.

The company's shares fell as much as 12 percent to a more than 6-year low of $76.86 in morning trading on Thursday.

Ralph Lauren President and CEO Stefan Larsson is set to leave the company on May 1. Chief Financial Officer Jane Nielsen will take over his responsibilities during the search for a new CEO.

It appears that the departure is due to Larsson’s differing vision for the company’s turnover strategy launched in June 2016. Of the departure, CCO Ralph Lauren stated: “Stefan and I share a love and respect for the DNA of this great brand, and we both recognize the need to evolve. However, we have found that we have different views on how to evolve the creative and consumer-facing parts of the business. After many conversations with one another, and our Board of Directors, we have agreed to part ways. I am grateful for what Stefan has contributed during his time with us, setting us in the right direction with the Way Forward Plan.”

Larsson, who took over from designer Lauren as CEO in 2015 after a successful three-year stint at Old Navy, was instrumental in the creation of the Way Forward Plan, launched in June 2016. Having struggled in recent years due to weak overseas sales as a result of the strong dollar, seeing a negative effect on its bottom line, the brand implemented the streamlining strategy centered on driving demand back to the company.

“We have built a strong foundation for future growth, including strengthening our team, refocusing our brands, evolving our products and our marketing, improving our operations and reducing our costs,’ Lauren said on Thursday, emphasising the company’s commitment to the execution of the plan.

But it could well have been that very cost-cutting plan that was his undoing. The initiative involved replacing incumbents with his own people, which hit morale at the 50-year old company, a fashion industry source said told Reuters, citing people familiar with the matter.

Larsson's approach could have been a cultural misfit with what Lauren had built over the years, forcing the board to step in, the source said.

Differences stemmed from the direction in which to take the company's product, marketing and shopping experience, Larsson said on a call with analysts on Thursday.

Lauren, who is also the chairman and chief creative officer of the company, said they had different views on how to evolve the creative and consumer-facing parts of the business.

The company is yet to realise the benefits of the restructuring programme, with revenue falling for the seventh straight quarter in its latest earnings report on Thursday.

The company's shares have lost more than a fifth of their value since Larsson succeeded Lauren in November 2015.

Lauren's son David Lauren, who was appointed vice chairman in October, is a likely CEO candidate, the source said.

Larsson, who will stay on until May 1, will get $10 million (8 million pounds) in severance pay over two years and his bonus for the company's 2017 fiscal year as part of his separation agreement.

He is also entitled to receive a pro-rated bonus based on his performance until he exits the company.

The company was recently in the spotlight for dressing up Melania Trump for Donald Trump's presidential inauguration, leading to calls by some on Twitter to boycott the brand using the hashtag #boycottralphlauren.

Several top designers, including Tom Ford and Marc Jacobs, had publicly declined to dress Melania Trump for the inauguration.

With reporting from Reuters.