NEW YORK — Does Penney's chief executive officer, Myron E. "Mike" Ullman 3rd, have Ralph Lauren's ear?
Sources indicate that a "dream" prospect of an exclusive line by high-flying Polo for the moderate department store giant could be a boon to the bottom lines of both public companies and could happen sometime next year.
While any prospective deal is far from fruition, the subject has been broached by the two sides and could involve a wide range of products in men's, women's, children's and home. A deal might be structured that's similar to Lauren's exclusive agreement with Kohl's under the Chaps label.
And while it would be a bold move for both, the heads of the two companies are not exactly strangers. Ullman sat for several years on Lauren's board and worked with Polo's president Roger Farah at Macy's in the early Nineties. Ullman is also well acquainted with the luxury world, having previously worked at LVMH Moët Louis Vuitton, reporting directly to chairman Bernard Arnault, and is likely to be sensitive to anything that would jeopardize Lauren's luxury brands.
The desire for a Polo/Penney's line would not come as a surprise given Ullman's comments during the retailer's annual meeting in Plano, Tex., last month. The ceo said the $18.7 billion chain is on course with its five-year growth plan to make Penney's the preferred shopping choice of Middle America. The driving force behind the growth plans is a focus on achieving midtier retail dominance over its rivals.
Since Ullman took the reigns of the retailer in late 2004, the transformation of Penney's has included efforts to "emotionally connect" with consumers by offering lifestyle-driven fashions and products and in-store experiences such as the Sephora beauty shops within the store, which are set to launch this fall. Additionally, Penney's has been opening off-mall stores averaging 90,000 square feet. The retailer is now expected to open some that will be larger, probably 100,000 square feet on average. The additional square footage is said to showcase some of the new products, such as the brand-rich Sephora, which is expected to utilize about 2,000 square feet.
From the perspective of Wall Street, Ullman's hard work is paying off. Since he took the helm Dec. 1, 2004, the stock is up 71 percent to $65.84 at Thursday's close, from $38.48.For Polo, the prospect of new distribution could be appealing, as it would give the company a broader market share in the retail space, where style-conscious consumers — because of inflationary pressures or other economic issues — have become more price-sensitive. The company has learned from experience through its Chaps line that the benefits can be great, if done right. Chaps has been meeting or beating plan at Kohl's.
And Ralph Lauren wouldn't be the only major designer to flirt with a more moderately priced channel. In recent years, H&M has proven that high-end designers have a curiosity about the moderate level, and can be successful at it.
"[H&M] is a fashion phenomenon, and I like to be a part of those things," said Karl Lagerfeld in 2004 when he struck his one-season deal with mass chain H&M.
"It's part of my job. It's the modern thing to do. Also, I like the idea of my name being used on a broad scale." Lagerfeld was followed by Stella McCartney last year and, this year, by Viktor & Rolf.
Meanwhile, Vera Wang has been negotiating to forge a licensing deal with Kohl's Department Stores for the past two years that would encompass apparel, accessories and home furnishings. A Kohl's deal would enable Wang to develop a complete lower-priced lifestyle collection, using a derivative of her name. Sources have indicated she could earn as much as $100 million over a multiyear period by signing with Kohl's. Wang has consistently said she's eager to reach the mass customer, but has hesitated thus far to make that a reality.
Kohl's has been on an aggressive path to seek exclusive deals. Its recent introduction of Chaps was the biggest launch in the retailer's history. It is also testing an exclusive women's and men's line from Liz Claiborne called Stamp 10, in 300 stores.
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