Ralph Lauren to Book $400 Million in Restructuring Charges
June 07 2016 - 10:10AM
Dow Jones News
Ralph Lauren Corp. unveiled a broad restructuring that will save
hundreds of millions of dollars, but also dent sales as the company
reduces merchandise sold to department stores and closes some of
its own retail locations.
The luxury apparel and accessories maker warned Tuesday that
sales in the current fiscal year would fall around 12% after
slipping 3% to $7.41 billion in the 12 months ended April 2.
In morning trading, the stock fell 9% to $87. As of Monday's
close, the shares are down nearly 30% over the past year.
The restructuring is the first significant step by new Chief
Executive Stefan Larsson to fix problems that have weighed on the
company's financial results, as the Journal previously reported.
They include too many brands and retail stores, and a reliance on
department stores, where shoppers are hooked on discounts. The
company also has bloated costs and inefficient sourcing.
The New York-based company said Tuesday that it expects to incur
a charge of up to $400 million for its restructuring efforts,
including a $150 million charge to liquidate excess inventory.
The moves are expected to result in $180 million to $220 million
in annual savings. This is in addition to $125 million that the
company previously said it would save from realigning its
management around global brands rather than by region.
Mr. Larsson, a former executive at the Gap Inc.'s Old Navy unit
and at H&M Hennes & Mauritz AB, was named CEO in September.
The post had previously been held by Ralph Lauren, the company's
founder, for all of its 49-year-history.
"Our performance has been disappointing over the last three
years, and it doesn't match the strength of the brand," Mr. Larsson
said in an interview. His fix-it strategy includes speeding the
production cycle of items, eliminating several layers of management
and cutting about 1,000 jobs.
Revenue is expected to fall as the company pulls back
merchandise shipped to department stores and closes about 50 of its
retail stores. Operating margin for the year is expected to be
about 10%, as the cost savings will offset expenses to open new
stores and currency fluctuations.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
June 07, 2016 09:55 ET (13:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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