A licensing deal with Polo Ralph Lauren can be golden for a manufacturer, as illustrated by the company's thriving sunglasses and fragrance businesses. But, as the megabrand grows, such deals have become more elusive because the company is bringing products in-house to control its destiny.

MANAGING THE BRAND EXTENSION

Over the last seven years, Polo Ralph Lauren Corp. has increasingly taken control of its own destiny, both by opening more of its own stores and by bringing a greater number of product categories in-house.

"As the company has grown and become more successful, our own core competencies increased, so it became more viable to run more businesses ourselves," said Jeffrey D. Morgan, president of Polo Ralph Lauren's product licensing division.

Polo takes back expired licenses or buys them back before expiration when "we feel we can add value to the businesses," Morgan said. He cited getting the European licenses back around 2000, children's wear back from S. Schwab Co. in 2004 and Lauren by Ralph Lauren from Jones Apparel Group in 2003. He said all three had been "major growth drivers for the company."

Each decision is made on the strategic level, evaluating Polo's ability in particular areas, as well as familiarity with the distribution channels — which is why the company's two biggest licenses are in eyewear with Luxottica Group and fragrance with L'Oréal. Other remaining licensing deals include Apparel Ventures for women's swimwear, Hanes for men's underwear, Hot Sox for socks and Echo for scarves and other cold-weather products.

"There is a greater economic opportunity for Polo Ralph Lauren as a company if we get 100 percent of the profit of the business, but there is also an increased risk," Morgan said. "Licensing is an important pillar in the overall wholesale-retail mix."

These moves should not be interpreted as the end of licensing for the company. Bringing in-house licences for products with the Ralph Lauren brand name is balanced by increasing licensed businesses on Chaps and American Living — both moderate-priced brands that don't include the Ralph Lauren name.

"Our decisions on licensing depend on which brands," said Morgan. "We continue to believe the licensing model is right for certain product categories. While we have been reducing the number of licenses on Ralph Lauren-branded product, we have been expanding in Chaps and now in American Living."

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