Ralph Lauren shares continue rally after co. names new CEO

AP News
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Posted: Sep 30, 2015 12:34 PM

NEW YORK (AP) — Ralph Lauren Corp.'s shares extended their rally Wednesday, a day after the fashion company announced it was hiring Old Navy's top talent to take over the CEO job.

Ralph Lauren, 75, who held the title, will remain as executive chairman and chief creative officer of the fashion and home decor business he created nearly 50 years ago. Stefan Larsson, global president of Gap's Old Navy chain, will become CEO in November and will report to Lauren.

Shares of the New York-based company rose 13 percent in midday trading Wednesday to $117.64, after climbing nearly 4 percent in after-hours trading Tuesday when the news was announced. It's a welcome shot in the arm, considering shares have slumped 44 percent this year, more than 21 percent in just the past three months as sales growth has slowed. The global fashion, home decor and accessories empire has been grappling with a tough economy in Europe, the impact of the strong U.S. dollar, and increased competition in the luxury business.

The news set in motion a succession plan, but Lauren told The Associated Press on Tuesday, with Larsson sitting beside him in his Madison Avenue office, that he isn't slowing down anytime soon.

"I am not coming in once a week. No. That's not the plan," he said. "The plan is we have a great company. We've always had a great company. Whether the stock is up or down or sideways, you can't evaluate it by this moment. You evaluate it on the long-term basis. So my growth has been long-term. My planning has always been long-term. I am always looking for the future and bringing in the right people that will build the company."

Choosing Larsson might be a surprise choice since he comes from a world of low-price fashion. Prior to his three-year tenure at Old Navy, Larsson had a stellar 15-year career at Swedish cheap chic chain H&M. But Lauren told The Associated Press, it's not about "what's fast fashion, or what's not fast fashion."

"It's about talent and vision and sensitivity," he said. "The company is about growth, and newness is a constant. And how to keep the beat of the company. And I feel Stefan has that beat."

Kate McShane of Citi Investment Research pointed three straight years of profitable growth at Old Navy under Larsson's watch. Fast fashion has become a gravitational pull across the retail industry and that has been felt at Ralph Lauren. McShane sees Larsson's experience in that world as a definite plus.

"We expect Larsson to bring a fresh perspective to the table and to inject newness to Ralph Lauren," McShane wrote.

McShane left her "buy" rating in place for Ralph Lauren, saying that the announcement removes uncertainty around the company's management succession.

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