The luxury apparel and home furnishings manufacturer ran fewer promotions and is changing its e-commerce platform. Refusing to cut costs to keep up with the competition may have cost 2015 top luxury brand polo Ralph Lauren Outlet some online sales in the first quarter of fiscal 2016, which ended June 27.
On a call to discuss its Q1 2016 earnings, executives with the clothing, accessories, and home furnishing manufacturer described the online retail environment as being “promotional” in the U.S., with other retailers cutting prices to move products. Ralph Lauren Sale refused to do that and, as a result, online sales grew 2% year over year during the quarter, slower than in previous quarters.
“The environment in North America was highly promotional in the quarter, and this was more pronounced online,” CEO Jacki Nemerov told analysts, according to a transcript of the call obtained from Seeking Alpha. “We chose to stay less promotional than the landscape and achieved a higher average unit retail (average price an item sells for) over the prior-year period as a result. While we knew this decision could slow our revenue growth, we believed it was the right thing to do for our brand.”
In addition to having a higher average price per item, chief financial officer Richard Madore told analysts the average order size grew year over year, though executives declined to provide details. Polo Ralph Lauren is No. 59 in the Internet Retailer 2015 Top 500 Guide.
The company also is in the middle of changing its e-commerce platform. “We continue to expect our infrastructure investments to create a year-on-year drag of approximately 60 basis points on operating margin in fiscal 2016, largely driven by the critical e-commerce re-platforming investment,” said Christopher Peterson, president of global brands. “I expect that the e-commerce re-platforming investment is likely to ramp up next year versus this year as we get closer to implementation. And so we’re expecting to be spending more money on the e-commerce re-platforming project next year.”
Ralph Lauren UK does not break out online sales. For the first quarter of fiscal 2016 ended June 27, the company reported:
Retail sales, which includes the e-commerce segment, of $935 million, down 2.6% from $960 million during the same period last year.
Net revenue of $1.618 billion, down 5.3% from $1.708 billion during the same period last year.