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Why an LVMH-Ralph Lauren Deal Is Unlikely

The American brand is too far removed from LVMH’s core luxury business model.
Designer Ralph Lauren poses on the runway at Ralph Lauren Spring 2016 during New York Fashion Week.
Designer Ralph Lauren poses on the runway at Ralph Lauren Spring 2016 during New York Fashion Week. (Getty Images)

Could LVMH really be thinking about acquiring Ralph Lauren?

This week, an Axios report, based on anonymous sourcing, speculated that the French luxury conglomerate and American brand, whose eponymous founder remains its largest shareholder, have recently been in talks. (A representative for LVMH declined to comment on the report. A representative for Ralph Lauren said that the company does not comment on rumours.)

The story generated plenty of conversation: the luxury industry remains in rapid consolidation mode, and LVMH has shown that it is keen on buying billion-dollar-plus businesses to further cement its dominant position as the global market leader. (At the end of 2019, it scooped up the American jeweller Tiffany for $16.2 billion, the largest deal in its history.)

Ralph Lauren, which generated $4.4 billion in the fiscal year ending March 27, 2021, has seen sales soar as pent-up demand benefitted fashion brands across the board. Last spring, sales in North America, its largest market, were up 301 percent year over year.

This isn’t the first time there’s been speculation about a potential Ralph Lauren sale. LVMH rival Kering has also been rumoured to have looked at the company.

The reasons why are clear: the Ralph Lauren brand itself remains strong, even in the US, where it is heavily distributed.

“When asked to name ‘luxury clothing brands,’ Ralph Lauren is always in the top-10, usually in the top five,” said Robert Passikoff, founder and president of Brand Keys, which surveys consumers about brand sentiment. A February 2022 Prosper Insights survey of almost 8,000 American consumers also found that nearly 11 percent had purchased something from Ralph Lauren over the past six months, up from 9.5 percent in 2021. Among 1,500 “fashion forward” customers, 19 percent bought something from the brand over the past half year.

LVMH has had plenty of success in the US market with its European heritage brands like Louis Vuitton and Dior, but not with more accessible, American-born brands including Donna Karan International, which it bought in 2000 and sold 16 years later after failing to turn it into a powerhouse. Its other major American fashion label, Marc Jacobs, was once on its way to billion-dollar status — pegged at the next Michael Kors, with talks of a potential IPO spin off. But after shutting down the contemporary, department store-reliant Marc by Marc Jacobs label in 2015, it underwent a major reset, only recently experiencing a new wave of success thanks, in part, to the popularity of its lower-priced Heaven collection.

But there are also some curious particularities that make a Ralph Lauren deal with a major French luxury conglomerate unlikely. For one, Ralph Lauren, the company’s 82-year-old executive chairman and chief creative officer, has never communicated a clear succession plan, nor has he ever communicated any interest in selling.

Most Ralph Lauren clothes, home goods and accessories are priced in the mid-range, not at the high end, which means the profit margins are often far lower no matter if they are discounted or not.

Another problem is that Ralph Lauren is fundamentally a different fashion business than the ones LVMH currently operates.

It starts with history. American fashion brands were built in a different way than European ones. Instead of being rooted in couture — which is all about originality, attention to detail and quality — they stem from the 7th Avenue rag trade, where the main business was making clothes cheaply and quickly, with a heavy sheen of marketing.

Ralph Lauren’s genius is in his cinematic world-building abilities, which he began in 1967 with a rack of ties. His aesthetic draws as much from New England preppiness as it does the English countryside and French aristocratic style, and now encompasses everything from home goods to kid’s clothing. But a significant amount of its products are sold in the off-price market. Out of 239 directly owned stores in North America, 195 — or 81.6 percent — are Polo Factory stores. In Europe, 63 percent are outlets.

Why is this such a sticking point? You can certainly find LVMH products at stores like TJ Maxx on occasion, and the group runs its own network of outlet stores. But most Ralph Lauren clothes, home goods and accessories are priced in the mid-range, not at the high end, which means the profit margins are often far lower no matter if they are discounted or not.

What’s more, despite its strong reputation, Ralph Lauren has not managed to play seriously in luxury fashion outside of men’s suiting. Its leather goods in particular — bread and butter for most big houses — are not held in the same regard as Dior, Gucci or Saint Laurent. While a large swath of consumers are happy to buy a $95 polo shirt from the brand — especially when it’s on sale — it is not a go-to label for four-figure handbags.

The company has made strides on these fronts over the past few years while enacting its turnaround effort, exiting lower-brow retailers like Kohl’s and decreasing its reliance on the off-price market. Still, Ralph Lauren might be a better target for Capri, which owns Michael Kors, or PVH, which owns Calvin Klein and Tommy Hilfiger. They have a more similar distribution strategy and pricing architecture.

However, these might not be as attractive acquirers to Lauren. Selling to a prestigious group like Kering or LVMH would be seen as a “crowning achievement,” as Axios put it, and secure his family’s fortune.

He can, after all, choose to do nothing, as long as he continues to satisfy shareholders.



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Compiled by Joan Kennedy.

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