Tensions Between New and Old, Played Out at Ralph Lauren

http://www.nytimes.com/2017/02/02/business/ralph-lauren-ceo-stefan-larsson.html

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When Stefan Larsson joined Ralph Lauren as its chief executive less than two years ago, to work beside the fashion house’s founder, he had big ideas for transforming the stagnant brand’s offerings into must-have clothing for the 21st century.

But as it turned out, all of Mr. Larsson’s ideas did not work for Mr. Lauren.

Citing creative differences between them, the company said on Thursday that Mr. Larsson would leave May 1, an abrupt shake-up for one of the country’s most recognizable brands.

“Stefan and I share a love and respect for the DNA of this great brand, and we both recognize the need to evolve,” Mr. Lauren said in a statement. “However, we have found that we have different views on how to evolve the creative and consumer-facing parts of this business.”

The shake-up adds uncertainty about the future of Ralph Lauren. Like many other brands that helped put American fashion on the global map, Ralph Lauren has recently struggled to reinvent itself. That struggle has been exacerbated by global slowdowns in high-end fashion, resulting from currency fluctuations and consumer unease, that have increased pressure to upset the status quo.

A result has been a rash of executive moves in the industry, on the creative and corporate sides. Just on Thursday, Riccardo Tisci, the creative director of the French label Givenchy, announced he was leaving after 12 years, and Barneys New York, the luxury fashion retailer, named Daniella Vitale as its new chief executive.

“I have never seen so much movement and disruption,” said Robert Burke, a luxury consultant who was an executive at Ralph Lauren in the 1990s.

But the move at Ralph Lauren also points to a truism of the industry: that it is often difficult for fashion founders to cede control of their businesses. Diane von Furstenberg, for example, went through a string of design heirs and recently agreed to part ways with a chief executive, and Carolina Herrera parted ways with her chief executive this year after disagreements over the direction of the company.

After decades leading the company, Mr. Lauren left the chief executive job when Mr. Larsson joined the business at the end of 2015. The new chief reported to Mr. Lauren, who characterized the relationship as a “partnership” at the time.

Still, Mr. Larsson, 42, was brought in to shake things up. Well-styled and soft-spoken, Mr. Larsson had been widely credited with rehabilitating Old Navy’s dowdy image and expanding H&M’s cheap chic offerings.

His appointment at Ralph Lauren signaled that Mr. Lauren, 77, was loosening his grip on the company. He had long resisted appointing someone else as a chief executive, and his decision to appoint Mr. Larsson was considered an acknowledgment that the brand needed a makeover.

Mr. Lauren, who started his career as a designer of oversized neckties, helped define American fashion for much of the late 20th century. But his brand has also mined a stable of core items like polo shirts, Gatsby gowns and Western denim for years. Some of those items have struggled to remain relevant as fast-fashion, e-commerce and an emerging generation of new designers have transformed where, how people shop.

In June, Mr. Larsson unveiled the company’s Way Forward Plan, pledging to focus on the creative and practical sides of the business. Drawing from the fast-fashion model, the company needed more surprising designs, and a quicker way to get them to shoppers.

The path, however, has been bumpy, and Mr. Larsson’s departure is the latest example. But the push-and-pull between past and future was perhaps most visible on Inauguration Day for President Trump, when Melania Trump wore a Ralph Lauren powder-blue cashmere outfit that looked like a first lady costume of yore — a Jacqueline Kennedy outfit for a Camelot-themed party.

It was appropriate. It was safe. It had worked before.

“There are few people you’ll find that are more modern-thinking and more open to change than Ralph,” Mr. Burke said. “I think he recognizes there need to be changes.”

During a call with analysts on Thursday, Mr. Larsson said that he and Mr. Lauren had worked “very hard to find common ground” over the last few months. Mr. Lauren did not participate in the call. Through a spokeswoman, both men declined to be interviewed.

The company said Jane H. Nielsen, the chief financial officer, would lead operations during the search for a new chief.

Shares of Ralph Lauren dropped more than 12 percent to close at $76.61 on Thursday.

The new chief will be responsible for turning those numbers around. But those efforts will be influenced by a company culture that continues to be shaped by its founder.

Pictures of Mr. Lauren hang throughout his clubby, dimly lit headquarters on the Upper East Side of Manhattan. Full of dark wood and tartan, the rooms are a mix of prairie chic and Old English gentlemen’s club.

“Ralph is the brand,” Mr. Burke said. “It’s an all-encompassing lifestyle.”

Now, Mr. Burke said, that lifestyle must figure out how to connect with a different audience. Younger consumers are less loyal, their tastes more fleeting. Shoppers have been trained to hunt more and pay less.

The Ralph Lauren brand has done its part to fuel that trend, with a variety of labels at different prices. Shoppers can still pay $600 for a Polo Ralph Lauren dress on Fifth Avenue. But Lauren clothing is also available at outlet malls, a growing number of discount stores and department stores that slash their prices year-round to attract customers. Under Mr. Larsson, the brand has said it would reduce the number of labels to three.

On Thursday, Ralph Lauren executives said that revenue had fallen 12 percent to $1.7 billion in the third quarter, and that the company was on track to close 50 stores by the end of this fiscal year.

“The Ralph Lauren flagship in New York’s Upper East Side is a world away from the selection of random Polo sweaters thrown onto a fixture at Macy’s,” wrote Neil Saunders, a managing director at GlobalData, formerly known as Conlumino, in a research note. “It is becoming increasingly difficult for the two to coexist without causing brand confusion.”