Ralph Lauren reported better-than-expected quarterly results and said it would pull back more inventory from department stores as it tries to keep a tight leash on discounting under its new Chief Executive Patrice Louvet. Its profit report comes at a time when the company has been keeping a razor-like focus on its inventory in an industry battered by sluggish spending and competition from online and fast-fashion retailers.
In a bid to regain its brand cachet, the company will pull back inventory from 20 to 25 percent of U.S. department stores during the second half of the year. "It simply isn't credible for a high-end brand to simultaneously showcase itself in a glitzy store on Madison Avenue, while at the same time hawking a random assortment of sweaters thrown in a ragtag way on a table in Macy's," said Neil Saunders, managing director of research firm GlobalData Retail.
Inventory levels fell by 31 percent in the first quarter ended July 1, Ralph Lauren said in a statement.
CEO Louvet, who took over the top job in May, is looking to build on the initiatives put in place by his predecessor Stefan Larsson. "We are looking at these 3 buckets: Our own sites, our wholesale.com and pure plays," Louvet said on a post-earnings call, adding that the company is actively looking to partner with the right online pure-play retailers.
Meanwhile, Michael Kors also reported better-than-expected profit for the first quarter as it cut down on promotions and sold more premium handbags, and lifted its full-year revenue forecast, sending the company's shares up as much as 22 percent.
Once the hottest name in affordable luxury, Kors has been grappling with declining same-store sales as more people shop online. Over-distribution of its products and a reliance on promotions to boost sales also eroded some of Kors' brand value and its appeal.
To reverse an eight-quarter slump in same-store sales, Kors is pursuing a multi-brand strategy for growth and diversifying into new products. Last month, the maker of the popular Mercer and Hamilton handbags announced a deal to buy high-end shoemaker Jimmy Choo.
Kors is also adding more menswear and dresses to its shelves, shrinking the number of stores it owns and yanking a chunk of its products from department stores such as Macy's, where steep discounts have been the norm to attract customers amid a broader retail slowdown.
Kors said on Tuesday the efforts yielded a higher average selling price per unit, implying the company sold more goods at full price. For instance, a $1,000 satchel, called The Bancroft, and customizable leather goods were a hit in North America, Chief Executive John Idol said on a conference call.
That helped operating margins at Kors stores increase for the first time in more than eight quarters, according to brokerage Jefferies.