Phil Knight Read Through for Ralph Lauren
Takeaway: Phil Knight stepping down is a complete non-event, for Nike at least. He hasn't been directly involved in the day to day operation of the company for the better part of 20 years. And, he's set up both a trust to protect his cache of stock that represents about 30% of the voting stock in the company and a management structure within the company that can continue to carry on his legacy.
But consider the read-thru for Ralph Lauren. Both Phil Knight and Ralph Lauren are roughly the same age (born 1938 and 1939, respectively) and started their respective businesses within three years of one another (NKE in 1964 and RL in 1967). Each had a vision for design, branding and marketing Athletic Footwear/Fashion Apparel in an outsourced manufacturing model. While Nike has been more successful, growing to a $55bn footprint globally versus Ralph's $15bn brand footprint, the success stories are unmistakable.
But that's where the comparison ends. Phil Knight is stepping down as Chairman, and Nike's stock won't miss a beat. As noted, his direct involvement has been minimal, but he has successfully built up a talented team and detailed HR succession planning process for the entire organization.
At Ralph Lauren, however, succession is a Black Hole. It's not even a topic that management will entertain, and when the question is asked you could almost hear them tense up. Succeeding Mr. Lauren is not even up for discussion.
From where we sit, if the company won't at least share Mr. Lauren's succession plan, they could at least instill the confidence in us that a plan does, in fact, exist. We're not so sure.
In the end, we think the best way out is for RL to acquire Tory Burch. They get Roger Farrah back, as well as an extremely talented and marketable potential CEO who is still in her 40s. Having Roger back would be good for a good 5 multiple points at RL. That's far better than the alternative -- which is Mr Lauren stepping down one day and the stock losing a third of its cap.
KSS - First Shots of Kohl’s New Concept
These are the first snaps we've seen of the new KSS Off/Aisle concept. And it still doesn't make a whole lot of sense to us. To have an 'off price' concept, you need steady access to high quality brands to consistently offer the perception of great deals to your consumer. KSS is capable of none of this. The retailer just simply doesn't have the brands or the content to support an off-price concept. Yes, it's a test, but if M Backstage is indicative of an ugly department store environment, KSS Off Aisle is a nail in the coffin.
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