State of Retail, From Ralph Lauren to Lee Jeans

Fashion started to close the book on the latest quarter, with updates last week from Ralph Lauren Corp., Capri Holdings Inc., Kontoor Brands Inc. and Canada Goose Holdings Inc. and Simon Property Group.

And with each report, there seemed to be something of an exhalation — the world is still a tough, complicated place, but there is a way forward for the industry. For most, shipping containers are still on the wrong side of the world, but the consumer is spending, pushing cautious annual outlooks higher. And just maybe, some better practices are taking hold as apparel brands ease off of price promotions.

Here, C-suite takeaways from WWD interviews with the chief executive officers of Ralph Lauren, Kontoor and Canada Goose and, for Capri and Simon, conference calls with analysts.

Shipping Snafus

John Idol, CEO of Capri, was crowing over the success of all of the company’s brands — Versace, Michael Kors and Jimmy Choo. But he was also clear-eyed on the supply chain challenges that have grown out of the pandemic.

“The biggest inventory issue is Michael Kors, and it is global because the supply chain issue is one that’s quite challenging, predominantly with shipping product around the globe,” Idol said. “So it’s not just a North America issue. It’s impacting us in all regions of the world. And let’s just first start with the timing piece of that.

“That has clearly added somewhere between 45 and 60 days on to our deliveries on a global basis,” he said. “Sometimes, a little bit more than that. And then, of course, we have the issue with Vietnam shutting down, which we did not anticipate in our planning.”

But, apparently, the supply chain disruption can both taketh and giveth.

Canada Goose CEO Dani Reiss makes his ultra warm parkas at home in Canada — with a big stockpile of globally sourced raw materials — and sees opportunity in the chaos.

“We do not expect to have any material headwinds in supply or shipping,” Reiss said. “We’re not anticipating any sort of delays.”

The Holiday Rush

The shipping jam-up has been exasperated by end demand — consumers have money and are wanting to spend, prompting brands to rush goods to stores and websites in time for the holidays.

I think it’s going to be a great season,” Canada Goose’s Reiss said. “People are ready to have a different kind of holiday season this year and I think it’s going to fuel economic growth for us and anyone else who has inventory.”

Some are just going to have to pay more to bring that inventory to shoppers.

Brands sought to move goods earlier this year and, where necessary and possible, are paying for air freight.

The good-spending cheer isn’t just driven by government stimulus — the job market is also improving. Unemployment fell 0.2 percentage points to 4.6 percent last month as the payrolls expanded by 531,000.

Last month, the National Retail Federation predicted holiday sales would grow by as much as 10.5 percent — blowing away the five-year average growth rate of 4.4 percent.

The Yin and Yang of Pricing

Price promotions are the drug that, yes, brought shoppers in and built market share in fashion, but flash-sale signs also amount to an addiction that lowers profit margins.

It’s been a perennial problem that many brands across the spectrum have been working on for some time.

Ralph Lauren, for instance, has ratcheted up prices for 18 straight quarters, as it sought to elevate its brand. Average unit retail prices rose 14 percent in the fiscal second quarter.

While that move higher is a long-standing strategic decision at Ralph Lauren, the brand is also operating in an inflationary world, with everything from cotton to shipping becoming more expensive.

“We have confidence in our ability to continue to leverage our pricing power in this contest,” Louvet said. “We know our brand is still bigger than our business, so lots of runway moving forward. Our mindset right now is really about fueling our momentum, investing in growth.”

Clearly, Louvet and Ralph Lauren are dedicated to an elevated positioning. But prices are up everywhere now because costs are up and because consumers have the money to spend.

The question for fashion in general is whether brands will fall off the wagon and accept lower profit margins to drive sales once the consumer world normalizes — whatever normal is.

Changing Amid a Sea of Change

The standard pandemic playbook had companies downsizing, resetting and preparing to come back stronger. Those that could have gone that route and are now looking to push growth to grab as much of the holiday rush as possible.

But there are also companies that were and still are in the midst of changes that grew even bigger during the pandemic.

Lee and Wrangler are stretching out in new ways under Kontoor Brands Inc., which VF Corp. spun off in 2019 — taking a big step out right before the world turned upside down.

Scott Baxter, Kontoor’s president and CEO, said despite the pandemic, the brands are finally getting the investment they need and finding their voices, through collaborations and new marketing efforts.

“We do have a little broader of an audience we found out when we spun off,” Baxter said. “We do have this culture of folks that are very tied to what’s happening in the avant garde. We’re finding those people again.”

David Simon, head of Simon Property, suddenly has much more at stake in the retail game himself with investments in licensing powerhouse Authentic Brands Group, retailers such as J.C. Penney Co. Inc., and the SPARC joint venture, which owns Forever 21, Lucky Brand and Brooks Brothers.

We have growth levers beyond our real estate assets that are unique attributes of our company,” Simon said. “We have proven to be astute investors. We have unique business models and diversity of income streams.”

But, not to oversell the point, he noted the company still gets 80 percent of its cash flow from its domestic property business.

“I’m excited about what we’re doing,” the CEO said. “I do think it’s still — it’s more it’s a tail wagging the dog, but you know, it’s an important tail and it’s a beautiful tail and it wags nice and is very friendly.”

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